Banking organizations in the United States have long been subject to two broad categories of regulatory requirements. The first is permissive: a “positive” grant of rights and privileges, typically via a charter for a corporate entity, to engage in the business of banking. The second is restrictive: a “negative” set of conditions on those rights and privileges, limiting conduct and imposing a program of oversight and enforcement, by which the holder of that charter must abide. Together, these requirements form a legal cordon, or “regulatory perimeter,” around the U.S. banking sector.

The regulatory perimeter figures prominently in several ongoing policy debates, from the treatment of stablecoins and other crypto assets to the role of Big Tech in finance. The perimeter itself, however, is ill-defined and often misunderstood. To clarify it, this Article situates the regulatory perimeter in the longer historical arc of U.S. banking from the colonial era to the present. This Article identifies a new pattern behind changes to the nature, shape, and position of the perimeter—outside-in pressure, inside-out pressure, and reform and expansion. The Article also pinpoints a shift, decades old but previously neglected, in the design of regulatory categories and the distribution of responsibility between Congress and the executive branch. Put together, these trends have created a regulatory perimeter that is broader, more complex, and arguably more permeable than at any point in its history—a line of fenceposts without a fence.

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AUTHORS:

Katherine E. Di Lucido

Nicholas K. Tabor

Jeffery Y. Zhang