A Free Market Bureaucracy: Judicial Deference and the Administrative Dismantling of New Deal Financial Regulations, 1977-1988

Erik M. Erlandson

This paper tells the story of the 1984 Supreme Court decision in Chevron v. Natural Resources Defense Council and its collision with the issue of banking deregulation during the Reagan administration. Chevron, which is now among the most highly-cited doctrines in American public law, granted new interpretive powers to administrative agencies, and in turn enabled the Federal Reserve under Alan Greenspan to twist the meaning of New Deal regulatory statutes to accommodate new urges for one-stop financial shopping. The decision shielded the Fed’s deregulatory decisions from judicial scrutiny, helping transform a segmented financial sector into one characterized by greater degrees of market concentration represented in a new cohort of supermarket banks. The paper thus unveils how changes in law produced concomitant changes in economic activity, and how deregulation, which many scholars argue signals the retrenchment of the state from the private sector, was actually nurtured through bureaucratic means. 

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