THE GLOBAL CRISIS AND THE GOVERNANCE OF POWER IN FINANCE

This article examines why the global financial crisis that began in 2007 has intensified policy debate about financial regulation and governance, and brought about the end of polite discourse in economics. Coming into the crisis, the received view on financial regulation regarded power in finance as a matter of market concentration alone, and understood concentration as stabilizing and an indication that competitively fit firms were dominating the market. This article argues that the current crisis necessitates a reframing of our understanding regarding the governance-not simply regulation-of finance. At the core of this reframing must be a much richer, multi-dimensional conception of power and its implications in financial systems. This article argues that the locus of power in finance has shifted with the rise of the "originate-and-distribute" model in the 2000s. This shift created new possibilities for rent-extraction and speculation, to which the existing model of regulation was not prepared to react. The subprime crisis emerged precisely, in the view developed here, in the context of this crisis in the governance of power in finance. So restoring effective financial regulation will require a deep rethinking of what finance has become, and what it should be. The challenge is profound, for resolving the nearly global crisis of financial systems-and, by extension, of macroeconomic stagnation-depends on recognizing and responding to the considerable, multi-dimensional power accumulated by the very financial firms whose dysfunctionality helped create that crisis in the first place.