Policy choices in financial market regulation: market rapture, club rules or democracy?

This paper argues in favour of democratisation of financial market regulation – a topic resisted by many market participants and regulators, yet explored by some policy makers in the US and EU. The form of analysis here is firstly descriptive, revisiting some aspects of regulation widely acknowledged to be implicated in the financial markets crisis of 2007 onwards; and then analytical, identifying and decoding the general failure of governance, checks and balances, through the work of Anderson on regulatory rapture, the socio-cultural work of Pierre Bourdieu on cultural and economic capital, and Anglophone work on the historical demise of ‘club’ regulation. The form of rational choice perspective underpinning regulation and its ‘independence’ (from parliaments) prior to the crisis had a mood: enraptured, regulatory agencies were no longer conflicted (in the American parlance), they were cheer leaders. Regulators networked globally yet privately, to negotiate on the basis of market demands (each national regulator championing its home industry) and to converge their rules accordingly – producing common blind spots, systemic vulnerabilities and heightened potential for global crisis. Convergence thrives on and reinforces regulatory independence from democratic oversight and steering. Active democratic oversight of financial market regulation is merited on two grounds: on principle and because it would result in regulatory diversity, resulting in more robust market systems at global level. [This abstract does not occur in the book.]