Derivatives and global financial governance before 2008: The role of the American state
Mots-clés :
Financial derivatives, Global financial governance, Financial structural power, OTC derivatives markets, Regulatory exemptions.Résumé
This work aims to study financial regulatory exemptions as a means of enabling structural financial power, which is the power one agent holds in determining the options available to other agents’ decision-making in a financial system. To test this perspective, we examine the development of financial derivatives and regulatory conflicts that emerged in the US over-the-counter (OTC) derivatives markets between the 1970s and the 1990s. The results show that the use of derivatives for risk management were fundamental in promoting the expansion of both the American and the international financial system following the end of the Bretton Woods Agreement in 1971. Derivatives were essential in allowing companies, banks, and governments to cope with the high volatility of prices and exchange and interest rates, and reinforced the global hegemony of the dollar. The U.S. government had an active role in supporting regulatory exemptions so that U.S. banks could lead and expand OTC derivatives. Therefore, after unilaterally putting an end to the stability-inducing mechanisms of Bretton Woods, U.S. public and private agents, by using financial innovations and regulatory exemptions, re-wrote and imposed new rules of operation for the global financial system. This is a clear case of exercise of structural financial power.
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