Peter Conti-Brown and Sean Vanatta on the History of Bank Supervision in America

Peter Conti-Brown is a historian and legal scholar of the Federal Reserve System, and an associate professor at the Wharton School of Business at the University of Pennsylvania. Sean Vanatta is a senior lecturer in financial history and policy at the University of Glasgow. Peter and Sean join the show to discuss their new book titled: Private Finance, Public Power: A History of Bank Supervision in America, as well as how powerlifting can be analogized in macroeconomics, and the implications of Trump v. Wilcox. 

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Read the full episode transcript:

This episode was recorded on May 27th, 2025

Note: While transcripts are lightly edited, they are not rigorously proofed for accuracy. If you notice an error, please reach out to [email protected].

David Beckworth: Our guests today are Peter Conti-Brown and Sean Vanatta. Peter is an historian and legal scholar of the Federal Reserve System, an associate professor at the Wharton School of the University of Pennsylvania, and a longtime friend of the show. Sean is a senior lecturer in financial history and policy at the University of Glasgow. Peter and Sean join us today to discuss their new book titled Private Finance, Public Power: A History of Bank Supervision in America. Peter and Sean, welcome to the podcast.

Sean Vanatta: Thank you so much for having us.

Peter Conti-Brown: Great to be here.

Beckworth: Well, Peter, you have been on many times. Sean, this is your first time. For both of you, this is the first time in studio. It’s great to have you here in person. 

Conti-Brown: I want to see where the NGDP gets targeted, so here we are.

Beckworth: This is it. This is the epicenter of nominal GDP targeting. Funny thing, I was at the Board of Governors Framework Review Conference two weeks ago. You know how many times nominal GDP targeting got mentioned? Zero.

Conti-Brown: That breaks my heart.

Beckworth: Broke my heart. I even raised my hand in one of the sessions. I didn’t get recognized. Here we are to discuss something better, more wonderful, and that’s your new book. We have a copy here in front of us on the table where we are recording this podcast. Before we get to your book, though, I want to talk about two other issues. One less serious, one more serious. Let’s do the less serious one first. Both of you gentlemen are powerlifters. It’s not common to find someone in this space, history, financial policy, monetary policy, who also are powerlifters. In fact, Sean, you introduced Peter to this, correct?

Powerlifting

Vanatta: Yes, I should interject that I’m no longer an active powerlifter. Peter and I met in our PhD program at Princeton. We decided that instead of being rivals and enemies that maybe we could be friends through working out together. It was in that context that I introduced Peter to heavyweights and he, I don’t think, has looked back.

Conti-Brown: Yes. Well, it’s even better than that. I did not want to. The first time he put me under a squat bar, I started shouting in decibels. He kept on saying, “Peter, you’re being too loud.” I’m like, “Is this right? This doesn’t feel right. This feels like I’ve been hurt or something.” It was not the easiest introduction, but he was a great teacher, very patient, and we spent a hard year together.

I remember at the end of that year, I had just blown up in terms of muscle growth. We were at a seminar. I asked a question that I thought was really friendly, but the person I asked the question of, who was presenting a paper, treated me as hostile afterward. I was like, “Sean, why was that person so grumpy at my question?” He said, “Peter, your shirt is way too tight. Your muscles are way too big. You look like you’re about to beat that guy up.” I was like, “All right, that’s it. That’s my coach doing what he’s supposed to do.”

Beckworth: The body language speaks volumes. Okay. Now, in your Substack, you bring out this, Peter. Listeners, subscribe to the Substack. Also mine, if you haven’t already. Peter brings out the stories. In fact, last time we were together, we talked about your Substack. In a recent edition of your Substack, you mentioned you’re now at 1,100 pounds. Is that correct?

Conti-Brown: Yes.

Beckworth: You’re striving for 1,500. I used that in a recent podcast. I just guessed where your 1,500 would land. Tell me how close I was. 550 for squats, 400 on the bench, and 550 on the deadlift. Am I close in ballpark range?

Conti-Brown: Almost. Part of it is body geometry. This might be interesting to people who care about this kind of thing. Everybody is different. My differences are weird. I have a very long torso. David, how tall are you?

Beckworth: 6’4”.

Conti-Brown: 6’4”. I bet, back-to-back seated, we’re the same height.

Beckworth: Actually, we’re looking eye to eye.

Conti-Brown: Yes, we’re looking eye to eye right now. I have a huge torso but very short legs, and that makes me an unbelievably strong bench presser. I’ll probably land about 425, 450. That also makes me very poor at squat. I’m one of the only powerlifters I know whose squat and bench press are basically in sync. I imagine I’m going to land at about the same kind of range, and then I’m targeting a 600-pound deadlift.

Beckworth: Wow, okay. Well, Governor Waller, you’ve heard it here. The challenge is on. You get to respond to that. Now, you heard the episode, it sounds like, where I used to use an illustration of hysteresis. You lose that strength and you don’t really fully recover. Was that a reasonable example, you think?

Conti-Brown: I thought it was great. I thought your guest was less taken by it than you were. I thought it was great. What’s interesting about hysteresis, to extend the analogy further, I’m right now training very hard on triathlon. I’m trying to optimize both of these very different kinds of things. That means that I have not PR’d in powerlifting since I’ve been actively training endurance.

It’s very different. Because this is a strategic decision, it’s a policy that you could extend to hysteresis, that we want to reorient the economy subtly, importantly, thoughtfully. We want to make accommodation for things. I can return to this without real devastation. Whereas if you train poorly, so you have a really bowed back, for example, on a deadlift, you injure yourself. It can be very difficult to recover ever again.

Strategic changes to the way that you train and move forward can introduce temporary setbacks that lead to benefits down the road. That’s what I think of it as a difference between changing the composition of an economy versus real exogenously shocked hysteresis, where the scarring from recession can be very difficult to recover from, versus thoughtful, call it industrial policy, call it reorientation and different kinds of policy priorities that allow for a dynamic economy to adjust itself in the face of those very same kinds of exogenous shocks.

In other words, you can be committed to an economy of prosperity, abundance, and growth without being committed to some trajectory over which there’s no insight, no control that just somebody decided once upon a time or didn’t decide at all. I found myself nodding along to that analogy, but I laughed the hardest when you said, “Do you think that’s fair?” Then your guest was just like, “Let’s talk about something else.”

Trump v. Wilcox

Beckworth: Well, there you go, folks. There’s so much you can draw from powerlifting in terms of analogies for the economy. I look forward to many central bankers’ speeches now drawing on this example. Okay, let’s go from that to something a little more serious. On May 22, the Supreme Court ruled in the Trump v. Wilcox case that the Fed was “uniquely structured and a quasi-private entity,” whatever that means. Therefore, the president could not fire sitting governors. Sean, Peter, what are your takes on this development?

Vanatta: I’d add, they say, “in line with the tradition of the First and Second Banks of the United States.” It’s not just that it’s uniquely structured, and we can talk about that, but it’s necessary for the argument to link it to these other institutions, which were much more explicitly private with a public purpose, but intentionally created as private. I’d be interested to hear Peter’s thoughts. My sense is that as a historical analogy, it really just doesn’t work, that both the way the Fed was created was so different than the First and Second Banks of the United States to liken them as a historical analogy doesn’t function.

Then that forces you to imagine that we look at the Fed in 1913, and that’s the Fed when there’s been such a revision in the way the Fed is structured, a centralization, much more administrative and executive power rooted in the Fed, that to treat it as something like, yes, there’s some weird public-private stuff still happening. To say that it’s this historical legacy that makes it distinctly independent, I struggle with that. I want the Fed to remain independent, so I don’t, maybe, want to look too closely at this analogy. If the justices are really invested in this, then not subjecting it to too much historical scrutiny might be our best bet. As history, it’s a bit hard to swallow.

Beckworth: Peter?

Conti-Brown: I think part of the problem is, as I wrote in my first book, which was the subject of my very first Macro Musings appearance in 2016, is, what do we mean when we say the Federal Reserve? As relevant to the Wilcox decision, we would be talking about the Board of Governors. That doesn’t have an analogy in history. It’s an agency of the government, right? Its email address is, of its employees, is .gov, appointed by the president, confirmed by the Senate. They are public employees. That’s different from the Federal Reserve banks.

That might be a little bit better analogy to the First and Second Banks of the United States. I completely agree with Sean that it just doesn’t work for purposes of this constitutionality. Put that to the side, is the Board of Governors a bank? No, it’s a bank regulator. It’s a bank supervisor. It also isn’t the entity that makes monetary policy. That’s the Federal Open Market Committee. Its governance is totally separate. It chooses its leadership annually. The chair and vice chair of the FOMC are chosen every single year. The president has nothing to do with that. 

I come down with Sean on this. As a scholar of central bank independence and financial policy, I think it would be an extremely adverse outcome to the American economy, the global economy, if we eliminated this legal protection for the Fed’s leadership. As a legal scholar and as just an aesthetic matter, this is very sloppy legal reasoning. Maybe that’s the world we’re in. For now, at least we can ring a bell that says central bank independence has reached peace for our time.

Beckworth: Okay, that’s hopeful. I guess my concern is whether it’s very robust. There’s the footnote where they made this point about it being tied to the history of the First and Second Bank, is that right? Is that something that’s going to stand the test of time when some future justice comes along and looks at it and stares at it?

Vanatta: Again, if the legal reasoning hinges on that connection and on saying that the Fed, as Peter said, whatever the Fed is in this context, has this historical tradition dating back to these institutions, I don’t think that that will stand up to scrutiny. It then becomes about what’s being litigated in the case, which aspects are we interested in and focused on, but it’s hard to imagine. If that’s what we’re hanging Fed independence on, it’s not going to last.

Conti-Brown: I think this is a good point to give a shout-out to Michael Barr, because the name of this case was Bessent v. Wilcox. Bessent, of course, is the secretary of Treasury. Wilcox, the member of the National Labor Relations Board who was removed by the president. If Michael Barr had stayed his course, been forcefully removed by the president, which he was saying he would do, and then sued, this might have been Bessent v. Barr. Then the question of Fed independence would have been served up front and center.

I suspect that it would have come out in favor of the Fed, given that footnote and given some other things that the Supreme Court justices have said over time, but I’m not certain of that. I think that foresight in removing himself and, thus, the legal question from the courts meant that we’re not talking about the NLRB, right? We are not talking about the Fed because the Fed is subject to this carve-out. Now, to be clear, this case came up as a preliminary injunction. It wasn’t litigated on the merits. The Supreme Court is saying, “We think that the administration will prevail on the merits,” but they’re not reaching that central conclusion.

There’s a lot up for grabs, but what they’re doing is signaling that, at least for now, central bank independence is going to attach. To be clear, this isn’t even the worst argument in originalism that I have read as a historian coming out of the Supreme Court. I think the way that the Supreme Court does history is always in the service of a legal argument. Some historians call that law office history. It’s motivated, right? We want a legal conclusion to get to. I think Fed independence, what we got from that footnote, is a pretty strong signal that the Supreme Court is not going to touch it.

Beckworth: If you’re drawing on history to support and motivate the independence, the Second Bank, we all know, Andrew Jackson went to war with it. The bank war. It became a presidential election issue and it ended. I don’t want to draw on that kind of story that it didn’t end so well for the central bank. 

Well, let’s switch gears and go to your book. Again, it is titled Private Finance, Public Power: A History of Bank Supervision in America. Maybe give us a brief overview of the book, why you two came together to write it. Why is it relevant to the current world we’re in?

Private Finance, Public Power

Vanatta: Yes, so the foundational question is just, what is bank supervision? We have a pretty good understanding. Academics, policymakers, bankers focus a lot on things like legislation, right? The rules that Congress writes for the banking system, they focus a lot on regulation. What are the rules that come out of that legislation or that agencies create in response to that legislation? What I think academics and other stakeholders have not really understood is this institution of bank supervision. How is it, on a day-to-day basis, that the government is trying to manage financial risk in the financial system?

Part of what we’re trying to do is understand how that’s evolved over time through a constant process of negotiation between government officials, both at the state and especially at the federal level, and private actors who are trying to generate profits, trying to manage banks to their own devices. It’s a story about institutional development and institutional change. It’s a story about rules versus discretion. It’s a story ultimately about the federal government taking overall ownership for the resiliency of the financial system and using supervision as the key way to ensure that resiliency.

Beckworth: How did you guys connect on this project?

Conti-Brown: During Sean’s powerlifting heyday, my intro to the sport, we decided we wanted to collaborate together. We’re trying to decide between two different articles that we might write. One was the history of bank-holding companies. The other was the history of the examination report, whose basic structure had been pretty stable for almost 100 years at the federal level. 

We thought, “What a funny thing to have.” It’s like a single document used to describe banks that existed during the time of slavery all the way through the post–World War II era. It’s the same sort of paperwork. We chose that one to focus on, although the holding-company history came into this book. We decided, if we’re going to put all this effort into writing an article, surely writing a book is just a little bit more work that they said to each other, foreshadowingly and incorrectly.

Seven, eight years later, now, we have the book that’s a history, not just of the examination report, but this whole extraordinary infrastructure of financial risk management that includes a whole chapter where we really delve into holding companies and concentration antitrust, how to supervise complexity, and things like that. It’s been a really extraordinary journey. In the meantime, we had got two PhDs, had six kids between the two of us, two different jobs, and lots else in between. It’s been a pretty fun ride.

Beckworth: All right, so writing a book can be an enduring relationship for the authors. Fantastic. All right. Going back to what you mentioned, Sean, this theme, both of you say in the book, supervision is not the same as regulation. It’s about institutionalized discretion. Can you unpack that for us?

Supervision vs. Regulation

Vanatta: Yes. The way to think about this is the financial system is dynamic, right? If your ambition is to monitor, control risk in the financial system, you need the chance to act dynamically in response. Supervision, on the one hand, is about giving government officials, or in some cases, private actors as well, the discretion to act when action is needed, whether at the individual bank level, when a bank is acting without safety and soundness or discriminating against certain categories of consumers, or at the systemic level when we need liquidity in the faces of a crisis.

Over time, there are different institutions of supervision. We can talk about those—comptroller, Fed, FDIC—that use different risk management frameworks. Overall, Congress is giving these institutions different kinds of discretion to serve certain policy goals. The overall one is, again, risk management of the system. I think we find that over and over again, even when supervisors fail, right—you have a big crisis, a lot of banks fail, there’s huge externalities—the response from Congress is often to give supervisors yet more authority and yet more discretion to try to manage the banking system. It’s not always a one-way ratchet, but it has often been, over time, this ratchet of giving public officials more and more authority to try to solve these problems and giving them more discretion on how they use that authority.

Conti-Brown: I think one of the key insights here about this discretion is it’s a very familiar one to political scientists especially, which is the idea that when Congress writes statutes very prescriptively, long statutes with lots of provisions, lots of requirements, it’s trying to constrict an agency’s discretion or writes relatively short statutes. It gives agency actors a lot more discretion. Where we add to that literature is a separate thing. Ironically enough, long statutes can still give a lot of discretion when you give these same actors a lot of different things to do and then say, “Go do all of them. You choose the priority.”

Part of the discretion the supervisors have is to choose which among their many required priorities given to them by Congress will they do first. What’s nice about this is although a lot of discussions about bank supervisory discretion come in the register of too much discretion is bad, rule of law is better, more predictable, more accountable, ironically enough, the discretion is the thing that can make bank supervisors more politically accountable.

Because when the political winds change, there’s a new president elected with different values, different ideologies, the existing legislative infrastructure for supervisors allows them to be reoriented in a way that matches the zeitgeist more appropriately. When a Democrat’s in office in the 2020s, and maybe they’re going to be focusing a little bit more on supervising financial risk as relevant to climate, maybe Republicans are going to be thinking more about supervising more in favor of crypto.

All of this is available to them. It’s all legal because these statutes are written in such a way as to permit it. The priorities that are reoriented reflect that political accountability. Supervisory discretion, it’s something that can be used in a lot of different ways, not only to manage the financial system, but also to manage political priorities within the financial system.

Beckworth: We’re going to go through the history in your book, but I want to jump to the end, to the present, where we are today, because there’s a lot of changes that have happened. I was at the Atlanta Federal Reserve’s Financial Markets Conference. They had several panels on the growth of private credit, the big thing now people are worrying about. There’s a lot of nonbank financial firms intermediating private credit. Many of them are inside the regulatory ring fence. Some are outside, though. How do we go from this supervisory vision of banks to this nonbank credit growth? How do we ensure stability beyond the regulatory fence?

Vanatta: When I try to think about this historically, what I tend to see is that as you get financial intermediation outside the fence, that’s where supervisors lose sight of what’s happening. That’s where risks come in that can’t be co-managed. You can think about supervision. It’s not always government managing the risk. It’s more appropriate, I think, to think of it as co-management with one side maybe dominant in the relationship.

More recently, it’s been government dominance, but that’s shifted over time. If you’re totally outside of that, then you’re outside of the view of government officials, and so co-management isn’t possible. Then it’s entirely private. That means that it’s difficult to account for or anticipate risks that then might spill into the perimeter. I think, again, the historical story is often new kinds of institutions.

You think about trust companies before 1907 that seem safe, that seem like viable alternatives to regulated and supervised institutions, where the risk isn’t monitored and where contagion begins. Then the effort is to bring those in after the crisis. I’m not predicting a crisis in private credit, but you can imagine, that’s a place where supervisors probably now want to be able to see more of what’s happening. If there is a crisis, we’ll enfold that within the supervisory perimeter.

Beckworth: Okay.

Conti-Brown: One thing to keep in mind about this is, this is the so-called shadow banking problem. The US bank supervisory system is filled with shadows, right? The comptroller of the currency supervises national banks, those banks with a national bank charter. The story of its life in the second half of the 19th century is its inability to supervise the shadow banks at the time, which were called state-chartered banks, right?

Before 1980, the Federal Reserve supervised only member banks, members of the Federal Reserve System and bank-holding companies. After 1980, that was still technically true, but then it had supervisory insight through access to the Fed’s paid services, the so-called master account. That expands that view. I worry a little bit less about the shadow banking problem, in part because while we have a system that is anchored on institutions, how you are supervised depends on what kind of charter you have, what kind of services that you provide and receive within the financial system.

Bank supervision, as we theorize it in our book, is about holding residual risk. The government is holding that residual risk come from any corner, be it private credit or insurance companies or however else. The fact that we have these bank supervisors who are actually examining the banks, they have through that lens, as Sean was saying, insight into counterparties, into the activities. Today, in the 2020s, I would say, the defining ethos of bank supervision is looking at the risks associated with activities as opposed to institutions.

That gives the government a lot more insight. Now, that also means that the government is going to be motivated to continue to expand that insight. We make the argument that Congress continues to expand the discretionary purview of bank supervisors. As we highlight in the book, they’re not doing that by accident. Very often, it’s the Federal Reserve or the comptroller that’s advocating for those kinds of expansions too.

Beckworth: Right now, we have stablecoins. There’s legislation going through the Senate, through the House, which is very similar to money market funds in the 1970s. This is a good example. Again, a key theme of your book is this dynamic nature. You’ve got to continually be vigilant and grow in your understanding of what needs to be looked at. 

Banking in the Early Republic

All right, let’s go back in history then to the beginning where you start. You start in the early republic. You have a section, early republic up to the Civil War. A lot of interesting history there. As you know, I studied under George Selgin, so I got a little exposure to this, the free banking literature. Some parts of the US were more solid free-banking examples—antebellum period—than others. Some were a hot mess. You guys mentioned Michigan, which is known for wildcat banking and such. Walk us through that period. What did we learn about bank supervision and lessons from it?

Vanatta: I think what’s useful in that period is to recognize its experimentation and effervescence. Many of the tools that we now associate with supervision were tried and either succeeded or failed in that period. Most of this is state-chartered banks. There’s briefly the First and Second Bank of the US, which we talked about. There’s experiments in central banking. There’s experiments in special chartering, where the legislature gives the bank a charter and, in theory, is exercising some oversight about who’s getting a bank charter and who isn’t, versus free chartering, where anyone who qualifies can get a charter.

There’s early experiments in deposit insurance. There’s experiments in onsite examination. It’s really a mix where some of these things are working in some places and not others. The system itself is highly fragmented, but there isn’t really a settled regime. Banking, of course, is also highly political. We talked about the bank war very briefly. It’s like nothing is really, I’d say, firmly in place. Then we get the Civil War, which really changes the dynamic. The federal government needs to finance the war. It’s through that effort that it creates the national banking system and solidifies chartering, examination, those sorts of elements of supervision and of banking more broadly.

Beckworth: George Selgin, I’ll mention him again, he has an article about the establishment of the national banking system and how they had to impose, I think it was a 5% tax on state bank notes, and then a 10% tax, finally knock them out of business so that the national banks could take hold and run with it. Wasn’t the national banking system itself fragile? It had certain characteristics that made it susceptible. There were lessons learned from that period too.

Conti-Brown: I think there are two to keep in mind. George is absolutely right. We learned a lot from him and his work. Think about what money was in that period, right? The intuition that we’ve got to tax these notes out of existence presupposes that the bank notes are the primary source of money. That might’ve been true for a few months or years in the initial period. Very shortly thereafter, bank deposits become the major source of money.

There’s no taxation on state deposits. What we have are two things that happened simultaneously. The first is the explosion of state-chartered banks. Taxing those notes out of existence worked. It didn’t tax the banks out of existence. Bank deposits remained a very important source of credit and liquidity and money, but not supervision. That period called by Mark Twain, the Gilded Age, we have these panics of the Gilded Age. They just are happening with incredible ferocity.

After the failure of the Second Bank in the United States, you have devastating panics in 1837, 1857. Then in the Gilded Age itself, 1873, 1884, and 1893, 1907, there’s the big ones. There are others too. We highlight all of these. Not all of them are the same. Some of them are handled actually quite deftly by the existing infrastructure. The last two, the Great Depression is a moniker we now reserve for the 1930s, but it was used for the 1890s before the 1930s made that depression so great.

That was an absolutely devastating panic. In 1907, a little bit less so, but still a real problem. What we saw is that the comptroller of the currency was very good at knowing the risks taken by the national banks. It was mostly ignorant of the risks taken by nonnational banks, be they trusts or state-chartered entities. It was very bad at responding to these panics and failures because it couldn’t do so. It didn’t have the ability to issue comptroller of the currency notes.

Perhaps it’s the most ironically named regulator in US history. It didn’t control any currency, right? It was designed to do so, but it failed to do that. It didn’t have a balance sheet. There’s no mechanism for liquidity. There’s no discount window. There was no central reserve. It became an informational regime. That information became pretty important for reasons we can talk about in the 20th century. It was set up for failure. That failure leads eventually to the creation of the Federal Reserve.

Vanatta: It essentially meant shifting risk management onto private entities, whether individual bank boards, so the comptroller would give the examination, say, “Look, here’s the problem with your bank, but it’s your responsibility to fix it,” or onto the clearinghouse in New York, which actually could provide the liquidity. While national bank examiners or banking officials in the 1860s had a really robust vision of the public role in ensuring a safe and stable banking system, through the 19th century, they cede that to private risk management because they just don’t have the institutional capacity to make good on what they hope they can do through supervision.

Beckworth: You guys have probably read Charles Calomiris’ book, Fragile by Design. He makes this argument that federalism contributed to some of this because it led to unit banking laws, not very well-diversified banking systems. What do you think of that argument, an underlying cultural, institutional trait?

Conti-Brown: The correlation is certainly there. Calomiris and Haber focus a lot on Canada as the counterfactual comparand for very few banks, similar economy, didn’t suffer any of the panics, certainly not in the Gilded Age, not in the 1930s, to the same extent the US did. Unit banking is one of the chief characters in our story here. When we get to the 1960s, it became the bête noire of the comptroller of the currency there, James Saxon, who views unit banking as essentially giving all of the evils of private monopoly to these just local, mostly Republican bankers, who just have the hands on their throat of the local economy. That’s the Saxon view.

Whether the unit banks were the cause of all of this instability is a bit tricky. It’s also the cause of creating the most robust financial system the world has ever seen, the greatest creator of financial asset that wasn’t enforced through the British Navy controlling colonies all through the world. I’ll leave to Calomiris and Haber that more aggressive argument. There’s no doubt that the decisions made at various points, that didn’t stop until the 1990s to protect the bank franchise in its tiniest form is an idiosyncratically American decision that led to a lot of different challenges in the way that we supervise financial risk.

Vanatta: I think one of the reasons you have supervision or the justification for it from the beginning is these are amateur bankers. These are farmers who have a bank. We need a supervisor to come in and explain to them how to do banking. That looks different and works differently in different communities. It is that amateur nature that is one justification for having the intensive supervision that we see in the US and we don’t see in other places.

Beckworth: I love the story that’s often told—maybe it’s pushing things too hard—during the Great Depression, all these banks, thousands of banks in the US shut down. I believe none shut down in Canada or very few. There were some stressed banks, but they were consolidated. They didn’t have the banking crisis that we had in the US. Is that a fair telling of history?

Vanatta: Yes, I would disagree with Peter. I would say that we have the most robust financial system in the world in spite of unit banking, not because of it. Yes, if you are a small bank in Nebraska and all of your customers are wheat farmers and the wheat crop fails, you’re done. If you’re all of these small banks and you have a commodity crisis after World War I, you’re done. It’s that lack of diversification and how small these banks are, and the quality of the management, which makes them susceptible to be totally wiped out.

Part of what we’re talking about is supervision, but another risk management strategy is size. There’s a constant tension throughout the period that we cover between supervisors and bankers and a lot of interested parties who say, “If we just had bigger banks, we wouldn’t need all of this government supervision because big robust banks are strong and they are safe.” As you say, Canada is an example. The anti-monopoly tradition is so strong in the United States that pushed against that so successfully for so long that if we have a fragmented, fragile system, then we actually need more public oversight to make that system robust.

Beckworth: That’s very interesting. That anti-monopolist push in turn leads to greater oversight, more government intervention to keep the system from falling.

Vanatta: The reason we have the FDIC is to preserve rural banking. That’s why it exists. That’s why it’s Steagall, who’s an Alabama populist, who sponsors it.

Beckworth: The irony is rich here in terms of history. Okay, very well. Let’s move forward then. We touched on this a little bit, but the late 1800s, we have these major financial crises. You get to the 1890s and then 1907, the big one that really leads the motivation for the Federal Reserve. What’s happening to supervision during this period?

Conti-Brown: This is the heyday of the comptrollers, what we call the information regime of bank supervision, just gathering information. This is the first time we see uses of the terms—I’m going to take it right up to the Great Depression—questions about forbearance, using that information and deciding not to act on it. Because the comptroller, the examiners, have authority to simply gather information, make suggestions, and then execute the bank if they’re failing, meaning liquidate it. We have some of our sources talking about, this is the only power that we have is to assassinate these bankers with nothing in between.

The 1907 panic, it’s important to note, it’s not the big one that causes the Federal Reserve, it’s the last one, or just the fatigue of it all. It’s a very serious global crisis. Looking around, it’s like, can’t there be a better system? What’s interesting is, in the creation of the Federal Reserve System as the nation’s central bank or central banks, more correctly, for that period, what’s quirky about the Federal Reserve System is not necessarily its governance, although that’s true, too. It’s that unlike any of the other central banks at the time, it was given direct, continuous examination authority.

Walter Bagehot, Lombard Street, he talks about all of the Bank of England’s efforts in response to panics. There’s a tiny provision in that book where he talks about “examination” of Overend and Gurney’s banks. This was in the height of a panic, where one employee of the Bank of England walked in there and just started asking questions. That was the sum total of the Bank of England’s examination authority. It didn’t have anything like an ability proactively to look at a bank’s books and assess its business.

The Federal Reserve was given that authority, and it was given that authority not just to be counterparties to these banks, although it was that, too, but to add, for the first time, examination and liquidity management, a discount window with preemptive authority to assess the solvency of a bank. When Bagehot is talking about a central bank’s ability to only lend to solvent people, that’s a wing and a prayer. They didn’t know who was solvent. Now the Fed knows.

Beckworth: It’s so interesting.

Conti-Brown: The Federal Reserve is given this examination authority at the same time that the comptroller of the currency is sitting on its board. There’s very little discussion, documented discussion, about why they made these kinds of decisions in the legislative design. What we do have is the comptroller going there for that purpose, examination authority within the Federal Reserve System so that we can wed, for the first time, this liquidity management and that examination authority.

Vanatta: It creates enormous tension, because throughout, what we’re looking at is different institutions with different risk management strategies. The comptroller is all about information, advising boards, bank boards to make better decisions, and then, as Peter said, executing the banks if need be. The Fed is all about providing liquidity but protecting its own balance sheet. Their approach to risk management is very different.

What you see then is both a kind of institutional tension. The comptroller resists giving the Federal Reserve banks any of its examination reports because the officers of the Federal Reserve banks are bankers who are then getting confidential information about their competitors. It’s interpersonal. John Skelton Williams, who’s comptroller of the currency through this whole period, goes to absolute war with the Fed, and the Fed, in turn, tries to eliminate the comptroller of the currency. We have continuous fights throughout this book about, well, killing the comptroller most especially, but eliminating or consolidating these agencies, and it never ultimately succeeds.

You can think about supervision as competing risk management strategies, central banking or deposit insurance, central banking or chartering and information. I think through the 1930s, that’s really how most policymakers thought about it, is you’re choosing between risk management alternatives rather than buying into the idea that you could layer these different institutions onto each other and get a more robust system overall.

Consolidation of Regulators

Beckworth: This raises so many interesting questions that bring us to the present. Bear with me. I want to come back to the present. Maybe we need to hop back to the past. This whole point of competition between bank regulators. We still have it to some extent today. We’ve got multiple bank regulators, FDIC, comptroller of the currency. We’ve got the states. There’s been proposals by the Trump administration to consolidate them into one. Does that make any sense?

I’ve heard arguments that maybe it’s okay to have multiple bank regulators because you can pick and choose. Maybe that’s a bad thing or that’s a good thing. Where do you guys land on this? Should we be more streamlined, more efficient, or is there a place for having multiple bank regulators?

Conti-Brown: The name of our book, Private Finance, Public Power, has been accused by some, mainly my wife, of being a boring title. That’s because the title we had before, actually, was, I think, very spicy and interesting but just didn’t make sense to many people. It was called The Banker’s Thumb. We called it The Banker’s Thumb for many years in homage to Stephen Jay Gould, the great evolutionary biologist, who wrote an essay, then a book, called The Panda’s Thumb.

The Panda’s Thumb has the argument that the panda has a sixth digit that it uses to peel off the very hard casing of bamboo to reveal the nutritional content, the protein, for the panda spends most of its waking hours doing this very thing. Some people will look at that and say, “Oh, God has designed this digit for the panda to assist in its life.” Stephen Jay Gould said, “The panda spends all of its waking hours clumsily peeling this bamboo. That digit is bad. It doesn’t work very well.”

In fact, what it shows is how evolution works, how an outgrowth of a wrist bone eventually evolved into something that could be looked to be like it was designed or suited to its time, but in fact, just through natural selection, ended up doing that. We called the manuscript The Banker’s Thumb, because these two features, the dual banking system, state-chartered banks and a national chartered banking system, plus what we call federal banking disharmony, meaning we have a lot of competing interests institutionally between the Fed, OCC, FDIC, now the CFPB.

No one would sit down and design that, no one, and say, what we really need is to have 101 chartering authorities because of credit unions—each state has about two—and we need six different entities that are involved in bank examination. No one would sit down to do that, and no one did. That evolved, that system evolved over time, and what that system does, it doesn’t peel bamboo in the most efficient way that you could imagine, but it does get to the point where we’re getting the bamboo shoots into the bellies of the pandas, to extend that metaphor. In fact, belaboring this metaphor maybe convinces me that our editor was right. We needed to abandon the title.

Vanatta: Yet, we still talk about it.

Conti-Brown: I love it, so I’ll always think about it.

Beckworth: It’s awesome.

Conti-Brown: The point is we’re skeptical of efforts to consolidate bank supervision to a single entity for two reasons. One is historians, and the second maybe is a little bit more of a normative argument but extends from the historical. As historians, the Trump administration is not unique in this respect. The Wilson administration seriously entertained this consolidation, and it was the one that created the federal disharmony. We see serious efforts beginning in the Roosevelt administration, and nearly every president thereafter undertook some effort to redesign this. You might have been involved in this, actually, in the Bush administration. Do you remember the Paulson blueprint?

Beckworth: Yes.

Conti-Brown: That was all about redesigning federal bank supervision.

Beckworth: I was not a part of it, to be clear, for the record, but yes.

Conti-Brown: You were on the international side, right?

Beckworth: I was.

Conti-Brown: In the domestic side, they were really involved in that. The Clinton administration had a federal banking commission that they proposed.

Beckworth: Okay, I did not know that.

Conti-Brown: All of these things failed, and they failed perhaps because of the political economy of it. The FDIC is championed by these states whose—FDIC, as Sean said, was created to protect. The Fed is a major player in politics in any political debate. Here’s where the normative part comes in. It’s extraordinary how well this system actually does work. All of us can come up and identify costs to it. There are very clear costs.

What we talk about a little bit less is the immense benefits that we have for having bank supervisors who are situated differently to think about, from the Fed’s perspective, macroeconomic stability, to think about, from the comptroller’s perspective, how do we bring new banks online, and to think about, from the FDIC perspective, how do we preserve the deposit insurance fund in the case of failure. Those are really different things. Most of the time, they overlap in interest, but sometimes they split.

When they split, you can see inefficiency. That inefficiency is there. You’re also getting a robust, almost adversarial, information-generating system where we say, “Well, what does supervision mean when we’re focused mostly on macroeconomic stability? What does it mean when we’re trying to bring more banks into the perimeter, into an innovative space? What does it mean when we’re focused only on failure?” That becomes more of a dialogue and, in principle, at least, can really create some really good outcomes.

Focus of the Fed

Beckworth: Very fascinating. It’s good. It’s useful to have these different perspectives from different angles, different concerns, which leads to the next question that you generated for me, and that is, could the Fed be split into a truly, just monetary policy organization, distinct from a bank regulatory organization?

I asked this question to Jeff Lacker, who used to be a Fed president, was real concerned about bank regulatory issues, and he said, no, if you care about the discount window, you really can’t separate the two because they have to know what’s going on in the banks, but you need a discount window to also—it goes with macro conditions in some context. It’s really hard to separate. Is that a fair reading?

Vanatta: From the beginning, we have the second comptroller of the currency as quoted in the newspaper as basically saying, “All the bankers want is for us to mind the currency and not worry about bank lending, because that’s not our job. We’re the comptroller of the currency.” The comptroller says, “You create currency through lending. We can’t mind the currency and not be interested in the business of the banks.”

I think you can take that and carry it all the way forward. You can’t think about monetary policy and not want an active set of insights and tools to manage the business of the banks up into the present. I think you could split those things, but I think it would be a significant loss to the ability of monetary policymakers to do their job.

Conti-Brown: There was a survey done by the World Bank of all World Bank members to assess this very question. How many of them locate supervisory authority inside the central bank? We’re in a minority. Most countries don’t do it this way.

Beckworth: Oh, really?

Conti-Brown: They have some supervisory authority that is distinct from it. Europe, obviously, is a big example. In favor of that view is basically a conflict of interest or mission creep story. They’re a little bit different. The conflict of interest is, if you’re a bank supervisor, you’re there to say no to banks about certain risks that are being taken. If you’re a macroeconomic stabilizer, then what you might want to be doing is actually saying yes to certain things, no to other things, in the name of medium-term stability.

Again, most of time, those are going to overlap, but sometimes they’ll split. The question becomes, when push comes to shove, what gets priority? Those who care a lot about supervision have sometimes said, “Oh, this is why the Fed can’t be responsible for supervision. It just doesn’t care enough about it. It’s always going to push supervisory priorities down on the totem pole.” Indeed, that was the very argument for stripping the Fed of almost all of its consumer protection, financial protection, authority, in Dodd-Frank.

Again, that would assume that we were all just jumping on a cruise liner and setting sail for a brand-new country, where we get to start over from scratch. We exist in an ecosystem that has generations of institutional design behind us. At no point in history do we wipe the slate clean. What I would worry about, and the reason I would largely oppose efforts to do a wholesale revision, is, again, we can clearly identify some of the costs. Some of the benefits are deeper, and their causal links are longer than we can observe.

I’m going to invoke G. K. Chesterton and the Chesterton fence, right? People look at this disharmony and see inefficiency and redundancy, and they say, “Let’s take down this fence.” Chesterton’s point was, when you encounter a fence in the road, and you think it impedes your path, and you want to remove it, you can’t remove it until you understand why it’s there. Understanding better why we have this federal disharmony with its inefficiencies, I think, causes people to have a lot more modesty about their certainty that we should remove it, because, I think, the benefits that it yields are pretty important.

Beckworth: I really like where this conversation has been going in terms of analogies. We’ve got cruises. We’ve got panda bears. We’ve got powerlifting. Let’s keep them rolling, Peter and Sean, if you can get some more in before the end of this conversation. Let’s go forward. Let’s go past the Great Depression unless you want to add anything else from the Great Depression.

The Great Depression

Conti-Brown: We should add a little bit—

Beckworth: Okay. Jump in.

Conti-Brown: —because the pivotal moment in the entire book is the bank holiday. It’s chapter 5 in our book, and it really recreates our entire system of bank supervision.

Vanatta: I think the key is that up until that time, there’s this contest between public and private risk management, who is going to take the lead? As you may know, the bank supervisory system in the 1920s doesn’t have a great showing. We already talked about the thousands of bank failures. What you see in the Hoover administration is an effort to use forbearance to keep the system afloat on the theory that eventually, if the economy recovers, bank balance sheets will recover, and things will be set to right. Hoover explicitly tells the comptroller in particular, “I don’t want any more bank failures.”

There’s this effort to use forbearance to keep the banks open. Of course, the banks keep failing. Consumers keep running on the banks to get their money out, causing them to fail. The legitimacy of at least the public part of the supervisory system falls apart, because if you’re telling us the banks are good and they keep failing, well, we’re going to believe what we see, not what you tell us.

The real transition comes when Roosevelt is elected. You see state-level bank holidays where governors shut the banks. Roosevelt enacts a full bank holiday shutting the entire banking system. What Roosevelt is able to do is to combine his personal charisma—I think, about the fireside chats, where he sits down, Americans are huddled around their radios listening to him say, “No unsound bank will be reopened.” He combines that with all of that information gathering that we’ve talked about.

Examiners have been gathering information since the Civil War on these banks. They knew which ones were sound and which ones weren’t. Over the week of the holiday, they were able to make decisions both about which banks to reopen but about which banks to close. Roosevelt’s promise that it’s only sound banks that are reopening was made legitimate because he kept banks closed. He said, “These are the ones that we’re not going to open.”

In doing that, Roosevelt essentially centralized risk management in the federal government. He essentially guaranteed the banks that were reopened would be safe and sound. Congress made good on this promise first by giving the Reconstruction Finance Corporation the ability to buy preferred stock in banks, so to recapitalize them and have the government become an owner, and then also creating federal deposit insurance to make depositors feel safe about the banking system.

We go from a world in which there’s a contest between public and private risk management. There’s a sense that public risk management is competing deposit insurance versus central banking to one where we’ve layered on these new institutions. We have the comptroller working through information, we have the Fed working through liquidity, we have RFC working through ownership, and the FDIC working through insurance. There’s conflict in that system, but overall, it creates a kind of stability to support a policy regime where bank failure is just not an acceptable outcome. That is stable then through the 1970s.

Beckworth: We’re past the Great Depression. What happens next that we need to take note of?

Conti-Brown: Obviously, read the whole book because we have a lot of stories we’re skipping over. I do want to highlight one that comes out of, call it the hangover of the Great Depression, which is there is just an allergic reaction to bank failure in the United States in the post-war era. It was during this period, just a few years after the end of hostilities in World War II, where the FDIC is getting its permanent status enacted.

Members of Congress are tripping over themselves, throwing praise at the FDIC because there have been almost no bank failures. One of them said the FDIC is the single greatest government entity in the history of the United States. This is right after the US military just beat up the Nazis. This is like high praise. They are so afraid of the Great Depression coming back again that the idea is that we need to manage risk to eliminate failure.

Now, in the 1960s comes a figure, and is mostly forgotten in history, but is another main character in our book, at least in one chapter of it. That is James Saxon. He was the comptroller of the currency during the Kennedy and Johnson administrations. He looked at that and he thought, “It’s time for us to change our orientation to risk. We should not be proud of the fact that so few banks are failing.” More banks should fail because more banks should take risk. The taking of the risk should be a private bank affair. The managing of the risk, now that’s where we come in, we do that together. 

He started handing out national bank charters like Tootsie Pops. It really exploded the size of the national banking system, much to the ire of the state banks that dominated the landscape at the time, including the largest bank in the United States, the Chase Manhattan Bank. It had been a New York state chartered entity going back to the days of Aaron Burr. Its CEO was David Rockefeller, that David Rockefeller, grandson of John D. Rockefeller.

There’s a big public fight where Rockefeller is like, Saxon is introducing so much risk-taking and it’s turning into gambling and he even invokes the Great Depression like we’re taking on too many risks. Eighteen months after that big fight, which happened at an American Bankers Association meeting, Rockefeller changed the Chase Manhattan charter from a state to a national bank charter because the benefits to having a national bank charter were so much better.

Now, Saxon’s largely forgotten, in part, because, at the end of his term, there were a couple of bank crises and bank failures, including by one flamboyant fraudster, who was bribing a bunch of people. He was like Sam Bankman-Fried but in cowboy boots and just a really colorful figure named Silverthorne. It’s like out of a movie.

Congress, as soon as this bank failed, pounced on Saxon. It’s one of the most fascinating congressional hearings that we have in our history, because Saxon just absorbs all these critiques. He said, “Yes, this guy is a scoundrel. He needs to be prosecuted for his fraud.” This is what you do when you take risks. Sometimes some don’t work out. It was a totally different orientation toward risk-taking. It was trying to shift the needle toward doing something more, doing something greater. He was trying to break the monopolies of these tiny unit banks in each of the states by introducing more competition.

That story is one that we included in such length in the book because it’s the story that we’re still having today. What’s the appropriate amount of failure in the system? In the face of failure, do we need to invoke all of our crisis authority and convene a financial crisis and say, “We cannot abide any failure”? Is there an opportunity for us to not call bank failures these great negative externalities, these great exogenous shocks, but instead say, “That’s the nature of risk-taking”?

We don’t give a definitive answer; that’s always going to be true everywhere. No such answer exists. It’s a question that we should have. Saxon’s idea that zero bank failures is not something to brag about. That’s something to think about, too.

Vanatta: And one point, I just want to bring up, so the Silverthorne episode is one of many, I think, stories in the book that make the book, maybe more interesting than you might think as a history of bank supervision. Supervision is a profoundly human activity. This is individual bank examiners around a table with bankers making important decisions. Throughout the book, we try to bring that forward, is to emphasize that human element.

We have interludes between the chapters, where we’re really trying to dig into what that experience of bank supervision was like in a given time and place, including post-war Japan, including schools for bank examiners in the 1950s, including Out West with O. Henry, the great short-story writer. Even though it’s about institutions, there’s something profoundly human about this activity. Again, that should give us some humility as we try to reevaluate it in the present to see the humanity of it in the past.

Beckworth: There will be plenty of humanity in the future, too. That same sense of humility is important going forward. Now, Peter, you brought up this push against unit banking in the 1960s. We know it’s not until the 1990s, I believe, where the Congress actually allows it to be interstate branch banking. Tell us the history there. What was the journey like? What was the pivotal moments that led to a greater acceptance of interstate branch banking?

Conti-Brown: Our book ends in 1980. We leave those stories about the 1994 repeal of the unit banking protections that were passed in 1927 for another day. We do have in our book a story about the building energy behind larger banks, which Sean was talking about earlier. This argument’s been with us for a very long time, that internal diversification of a bank’s balance sheet, a single bank’s balance sheet, can itself be a robust protection against failure.

The biggest change, and this is really relevant to the current day, we’re seeing a convergence in antitrust policy across Democrats and Republicans in really important ways, the J. D. Vance enthusiasm for Lina Kahn, for example. It’s really important to recognize that bank merger analysis, which arises out of the 1950s and 1960s, really zigs where the rest of antitrust zags in the sense that what we have is Congress just cannot decide what its priority should be.

Should bank antitrust efforts be focused on increasing competition, protecting the unit bank, increasing public welfare? Should it be about financial liquidity and stability? What it decided to do in two successive statutes, one in 1960, one in 1966, was say, “All of the above bank supervisors, you figure it out.” Then in 1966, when that didn’t quite work out, they said, “No, really, all of the above, you figure it out.”

Anyone who says, “Well, what bank antitrust means is that banks need to be as big as possible because that’s the best way to manage a stable financial system, and Congress has always made that clear,” is as correct and as incorrect as someone who says, “What we always need is really small banks that can compete against each other and don’t pose a too-big-to-fail problem.” Bank supervisors are left to manage a wide array of competing claims and trying to assess that complexity. Because they did, over time, they started approving more and more larger and larger acquisitions of branch networks and branching applications and acquisitions overseas and other kinds of things like that, such that by the time we get into and through the 1980s, there’s enough energy in Congress to say, “The great national experiment with unit banking is over.” That is repealed in 1994.

Vanatta: There’s also a great Saxon story about this. In Florida, he allows a national bank to operate an armored car as a mobile branch. The bank can’t build a branch outside of the city, and so they allow this armored car to drive around in the suburbs of this Florida town and get sued by state banks trying to block him from doing this. It’s another way in which Saxon is urging innovation and competition in silly and outlandish ways, recognizing that the system is so constrained by the legacy of the New Deal that something like an armored car as a mobile bank branch is terrifying to state bankers.

When to Let a Bank Fail

Beckworth: Great stories. In the time we have left, let’s land the plane on where we are today. You’ve touched on it, both of you, earlier, this question of, do we want some failure? Do we want some controlled burns in the system of sorts? I bring that up because of what happened in 2023. As it unfolded in real time, it was about panic, it was about social media, but then we’re going to look at these banks actually had bad business models. Maybe it was okay to let them fail.

I imagine it’s hard in real time if you’re a policymaker. You want to hit that, “Oh, this is a systemic crisis button.” How do we land the plane? How do policymakers know when to let a bank fail, when to step in? I know there’s no easy answer to that, but give us your best shot.

Conti-Brown: My cynical answer is, your intuition about how much failure is appropriate—I’m speaking to the bank regulators—it needs to be increased. You need to be much more tolerant of failure. This isn’t just hindsight bias, as you know, I have talked about on this show before. I think I think the Fed and Treasury and FDIC mishandled the 2023 crisis in about seven different ways. I’ve thought that throughout.

There’s a new piece by Jonathan Rose and Steven Kelly that, I think, is probably the single best piece of writing on the 2023 crisis that really goes through this argument that you’re talking about, about what exactly was happening in the system? Is this a failure of supervision? Is this a bank crisis that we needed to have 13-3 facilities open? Was this something where failure would have been better?

I think we can say that the Biden administration’s tolerance for bank failure should have been expanded. It was way too low. What bank supervision can do is not to commit itself, handcuff itself to any conception. The way Sean introduced the topic is about, because financial risk is dynamic, supervision must also be dynamic. We don’t want to cast in amber one conception that might be relevant in 2025 that’s going to be guiding risk-taking in 2035. We want supervisors to be dynamic, too.

A key vector of that dynamism is to recognize that taking risks is something that both banks do and supervisors do, too. It’s just different kinds of risks. The risks the banks take percent of the profit motive is where innovation comes from. The risk that supervisors take is that through collaboration, through sometimes contestation with those banks is recognized that they’re going to be looking at things, they just don’t know how this is going to turn out. And they need to be tolerant with the fact that some of these counterparties of this bank will have to price in their bet on the innovations that this bank has taken, take appropriate precautions for themselves, and that we need to allow them to do so because they’re definitely going to privatize the upside of that risk.

Are we always going to commit to allowing them to socialize the downside? That’s called bailout culture, and we should get rid of that.

Vanatta: I think another point is part of the challenge in writing this book is so much information about how supervision works is confidential, is kept as close to the vest as possible by government officials. A point I’m going to steal from Peter is that we actually don’t know, is 2023 a failure or a success, right? Did supervisors in all the banks that didn’t fail give them the forewarning, explain to them that they needed to watch out for what rising interest rates are going to do to their balance sheets? Thousands of banks followed their supervisors to make decisions, which led them not to fail. A few banks ignored their supervisors and failed.

We don’t know, right? We don’t know what advice bankers got. We don’t know how they made the decisions that they made, and we probably won’t. Our ability to evaluate how well supervisors are managing risk is really limited by how confidential. That confidentiality is important, right? If you’re sitting around the table with your supervisor, you want to have a frank and candid conversation and not think that’s going to leak to the press the next hour. It’s trying to figure out how to manage public oversight, sort of expert oversight over the process, and maintaining enough confidentiality to make the system work.

Beckworth: That is a great point that we only see the failure, the few failures of ’23. We don’t think about all the successes. I bring this up because these conferences I’ve been to over the past month, particularly the Atlanta Fed Financial Markets Conference, in the sidelines, the networking, there’s a lot of talk about the supplemental leverage ratio, should we adjust it or not? Some were for, some were against, different versions of it.

One person who is for taking Treasuries out says it’s absurd to point to SVB as the reason why we need to keep them in because that was the one that failed. We don’t know about all the other ones that hedged the risk. How can you draw conclusions from one bank? Maybe they should have done more, but is it the business model? Is it them? We need the full constellation of data, but as you said, we don’t have that data.

Conti-Brown: It’s just bad social science to focus exclusively on costs without any eye toward benefits. Whether we’re doing that in modeling these kinds of things or doing an empirical analysis of what it is or when you’re writing your history of these kinds of issues. Getting a 360 view of how risk is taken and why, with less opacity, more transparency so that historians can dig in.

Listen, let’s not be radical here. We’re not asking for the Fed to throw open its books so we can assess every bank that was supervised in 2023. Honestly, if they were willing, we’d accept it, but that’s not the request. How about 1923, though? Can we look at those examination reports? I see everyone who was participating in that world is dead, and the legacy that they left behind is still ours to assess.

I think having an ability for scholars, historians, somehow on an anonymized basis, collaborators outside of the system to engage in some of this assessment, some of this research would do wonders for improving the process of supervision, just mechanically, make them better supervisors. Also, from a perspective of political accountability, it can tell us when we should be applauding bank supervisors and when we should be reforming them. Right now, we have no insight. We have no idea.

Beckworth: You heard it here, folks. If you’re listening from the Federal Reserve System, please incorporate the changes that Peter just suggested. With that, our time is up. Our guests today have been Peter Conti-Brown and Sean Vanatta. Their book is Private Finance, Public Power: A History of Bank Supervision in America. Be sure to get your copy. Thank you, Peter and Sean.

Vanatta: Thank you.

Conti-Brown: Thank you.