Special Interests: The FINE Situation

Abstract

The FINE Study is not unique in failing (so far) to culminate in enacted reforms. Neither the Commission on Money and Credit nor the Commission on Financial Structure and Regulation (the Hunt commission) succeeded in convincing the Con gress of the wisdom of their proposals. The present paper is not concerned with the particular merits of the recommendations of any of these studies. Instead, its premise is that powerful groups and lobbies today areocapable of blocking any serious attempt at reform; if reforms are to be achieved, the concerns of these special interest groups must be addressed directly. Further, with the growing Balkanization of financial intermediation that is everywhere evident, the strengths and diversity of special interest groups are growing and this will reduce the probability of successful reform in the future. The modest objective of this paper is to examine a small number of issues that appeared to attract the attention of selected special interest groups and to identify what seems to concern them. As will become clear, some groups occasionally appear to be arguing for positions that are not especially beneficial to the interests they represent. Academicians and others may be able to improve the chances for reform if the game and the players' positions are more widely appreciated. The first section of the paper sets out an interpretation of how political games are played, drawing from recent attempts at reforming the financial system. The second section identifies topics that concerned different interest groups during the FINE study hearings and briefly attempts to explain positions. This paper ignores the special interests of government agencies for reasons of space.