What money can’t buy

by Leon Wansleben, Assistant Professor, LSE Sociology Last week, a curious incidence occupied my time more than I would have wanted or expected. I received an email from a German sociologist, who addressed me with a strange request: He wanted me to conduct 15 interviews for him on some specific question; the data would then be sent to Germany to be evaluated there; my remuneration would be 1500 euros

Divisions of Regulatory Labor, Institutional Closure, and Structural Secrecy in New Regulatory States: The Case of Neglected Liquidity Risks in Market‐Based Banking

Monetary policy and financial regulation have been regarded one of the paradigmatic domains where states can reap the benefits of delegating clearly delineated and unequivocal policy tasks to specialized technocrats. This article discusses the negative side‐effects and unintended consequences of particular ways to partition such tasks. The separation between monetary policy formulation, central banks' money market management, and financial supervision has weakened policy makers' capacities to address risks associated with banks' active liability management and to mitigate pro‐cyclical dynamics in money markets. These adverse effects derive from the neglect of liquidity as a regulatory problem in formal task descriptions; from the obstacles to positive coordination between specialized technocrats in the self‐contained domains of monetary policy formulation, implementation, and prudential regulation; and from a dissociation between formal responsibilities, which lie with regulators, and the resources residing in money market divisions – market expertise and influence over counterparties – that are critical to influence bank behavior. I explore these mechanisms with an in‐depth case study of British monetary and financial governance between 1970 and 2007. I posit that we can generalize the respective mechanisms to explore unintended effects of ‘agencification’ and to contribute to a broader re‐assessment of those organizing principles that have guided the construction of ‘new regulatory states’.1 Introduction 2 The return of liquidity risks with a vengeance 3 Rethinking the disentanglement of financial regulation from monetary policy: The unintended consequences of "agencification" 4 Case selection and methods 5 The emergence of financial regulatory state in Britain and its failure to regulate liquidity 6 Discussion and conclusion List with interviewees Acknowledgements Reference

Formal Institution Building in Financialized Capitalism: The Case of Repo Markets

Money markets are at the heart of financialized capitalism, as those markets that provide the funding liquidity needed for credit creation and leveraged trading. How have these markets evolved, grown, and become critical for larger financial flows? To answer this question, I distinguish an early period of financial globalization marked by regulatory arbitrage, offshoring, deregulation, and informal trading practices from a period of regime-consolidation marked by formal institutionalization. Concentrating on repo markets as the key funding sources for market-based banking, I demonstrate that new institutional arrangements for these markets were initiated by private sector associations, but supported and authorized by public authorities. Bond trader groups codified new contractual arrangements and these were validated via reforms of bankruptcy codes and changes in central banks’ policy frameworks in the United States and European Union. Through these modifications and re-articulations in institutional conditions, transactions and large exposures on money markets became routine affairs—for shadow banking actors like money market funds as well as for commercial banks. The article concludes by discussing the continuity of regime-consolidation efforts after the transatlantic financial crisis and hypothesizes that they reveal “neopatrimonial” features.Introduction Money market expansion during the liberalization-phase of financial globalization How repo became a highly institutionalized segment of the money markets “Secured money” in a market-based system Repo and the development of market-based banking Discussion and conclusion Notes References Acknowledgement

Capitalization and its Legal Friends

Katharina Pistor’s argument in The Code of Capital about the constitutive role of legal practice for the creation and distribution of wealth requires contextualization; her claims about the stand-alone role of law in determining the political economy of global capitalism are exaggerated. My first intervention concerns the concept of capital. Capital evidently is not just a legal code, but also constitutes a financial accounting entity that emerges from processes of investment, which are embedded in (economic, social, political) structures that are facilitative of unequal distributions of rewards and risks. Legal coding should be considered as part of such ‘capitalization’ and as becoming more critical in the contemporary economy, in which capitalization increasingly happens through financial engineering and through capturing rents from‘intangible capital’. Secondly, we can only understand the distributional implications of legal coding if we recognize a) the importance of rent-seeking in secularly stagnating economies and b) the particular class configurations in what Milanovic, B. (2019).Capitalism, alone. Cambridge, MA: HarvardUniversity Press calls‘liberal meritocratic capitalism’. The consolidation of a capital-richandhard-working upper class in such a capitalist formation (the extreme case being United States) not just indicates a close alliance or overlap between holders of wealth and the professions (fund managers, legal advisers etc.) that serve them. It also indicates that social class structures–the paths of socialization they reproduce; their in-built social sorting mechanisms; their close association with ideologies of legitimate privilege–play a key role in reproducing economic distributional outcomes.1 What is Capital? 2 Legal Coding and Class Structures 3 Practices of Capita

Wie wird bewertbar, ob ein Staat zu viele Schulden hat? Finanzexperten und ihr Bewertungswissen in der griechischen Schuldenkrise

Zusammenfassung: In dem Aufsatz wird für eine Wissenssoziologie der Staatsschuldenkrisen geworben, die an der Erforschung von Expertenkulturen in der Finanzbranche ansetzt. Es wird argumentiert, dass man mithilfe des Begriffs der kalkulativen Rahmung erfassen kann, worin die epistemische Praxis der Analysten besteht und welche Funktion ihre Erzeugnisse für Marktteilnehmer und andere Nutzer von finanziellem Wissen erfüllen. Der Begriff der kalkulativen Rahmung wird empirisch und konzeptuell erweitert: Es wird beschrieben, wie staatliche Schulden als spezifische Finanzwerte gerahmt werden und wie sich diese Rahmungen in Krisensituationen entwickeln. Der herangezogene zentrale Fall ist die Bewertung von Griechenlands Staatsschulden durch Analysten internationaler Banken im Zeitraum von Anfang 2010 bis Mitte 2011. Dieser Fall zeigt, wie Krisenrahmungen konstruiert werden und sich zur Bewertung staatlicher Insolvenz verdichten. In dieser Krisenphase schreiben sich die Analysten in Kontexte staatlichen Krisenmanagements ein und begleiten dieses Krisenmanagement bewerten

Die Erwartungen der Industrie für das Jahr 2000 - Maschinen- und Anlagenbau: finanzpolitische Irritationen müssen ein Ende finden

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How Central Bankers Learned to Love Financialization: The Fed, the Bank, and the Enlisting of Unfettered Markets in the Conduct of Monetary Policy

Central banks’ role in financialization has received increasing attention in recent years. These debates have predominantly revolved around authorities’ ‘benign neglect’ of asset bubbles, their deregulatory policies, and the safety nets they provide for speculative exuberance. Most analyses refer to the dominance of pro-market interests and ideas to explain these actions. The present article moves beyond these accounts by showing how an alignment between techniques of monetary governance and ‘unfettered’ financial markets can explain central banks’ endorsement of increasingly fragile structures of liquidity and their strategic ignorance towards growing amounts of debt. We analyze the processes of abstraction and formalization by which the ‘programmes’ and ‘technologies’ of monetary governance have been made compatible with the texture of contemporary finance; and we show how central banks’ attempts to make markets more amenable to their methods of policy implementation shaped new conduits for financial growth. As empirical cases, we discuss the Federal Reserve’s experiments with different policy frameworks in the 1980s and the Bank of England’s twisted path to inflation targeting from 1979 to 1997. These cases allow us to demonstrate that the infrastructural power of contemporary central banking is predicated on the same institutional foundations that have made financialization possible

The Constrained Politics of Local Public Investments under Cooperative Federalism

Public investment spending declined steadily in advanced economies during the last three decades. Germany is a case in point where the aggregate decline coincided with growing inequality in investments across districts. What explains variation in local investment spending? We assembled a novel dataset to investigate the effects of structural constraints and partisanship on German districts’ investment spending from 1995 to 2018. We find that the lack of fiscal and administrative capacity significantly influences local investment patterns. Yet, within these constraints, partisanship matters. Conservative politicians tend to prioritize public investment more than the left. This is especially the case when revenues from local taxes are low. As the fiscal conditions improve, left-wing politicians increase investment more strongly and hence the difference between the left and the right disappears. Our findings are indicative of how regional economic divergence can emerge even within cooperative federalist systems and show that, despite rigid fiscal rules, partisanship matters when parties face trade-offs over discretionary spending.Über die vergangenen Jahrzehnte sind öffentliche Investitionen in Industrieländern deutlich zurückgegangen. Dies ist auch in Deutschland zu beobachten, wo der Rückgang mit wachsenden Ungleichheiten zwischen Kreisen einherging. Dieser Beitrag untersucht diese interregionalen Diskrepanzen von öffentlichen Investitionen in Deutschland. Zu diesem Zweck nutzen wir einen neuen Datensatz, der strukturelle Bedingungen sowie parteipolitische Aspekte erfasst, die Investitionstätigkeit auf der Kreisebene zwischen 1995 und 2018 beeinflusst haben. Wir zeigen, dass Finanzprobleme sowie fehlendes technisches Personal die Investitionstätigkeit maßgeblich beschränkt haben. Gleichzeitig setzen unterschiedliche lokale Parteien in Anbetracht solcher strukturellen Beschränkungen unterschiedliche Prioritäten in ihren freiwilligen Ausgaben. Konservative Bürgermeister und Landräte tendieren dazu, öffentliche Investitionen mehr zu priorisieren als linke Politiker. Dies ist vor allem der Fall, wenn die Einnahmen aus Gewerbesteuern gering sind. Wenn die Einnahmen steigen, erhöhen linke Politiker ihre Ausgaben für öffentliche Investitionen allerdings stärker als rechte Politiker, sodass der Unterschied verschwindet. Diese Resultate indizieren, dass regionale Ungleichheiten in öffentlichen Investitionen sogar in kooperativen föderalen Systemen auftreten können und zeigen, wie Parteipolitik lokale Ausgabenentscheidungen selbst dann beeinflusst, wenn lokale Entscheidungsträger unter rigiden Regeln operieren.Contents 1 Introduction 2 Germany’s divergent local investments and the political economy of local public finances 3 Constrained partisanship: The politics of public investments in a multi-level polity Fiscal and administrative constraints for local public investments Local partisanship, voluntary spending priorities, and responsiveness to different constraints 4 Data and methodology Data Independent and dependent variables Methods 5 Empirical results The constraining effects of Germany’s semi-sovereign state on local public investments The constrained partisanship of investment spending 6 Concluding discussion Reference