The Role of Rival Litigation in Wilmarth\u27s New Glass-Steagall

The role of private enforcement of public law is an uneven one among financial regulators. Private litigation has played an important role in the enforcement of the federal securities laws since the Supreme Court recognized an implied private cause of action for violations of the anti-fraud provisions. In contrast, courts have been unwilling to establish an implied private right of action under the federal banking laws. Private litigation, however, played a significant role in the enforcement of the Glass-Steagall Act, the New-Deal-era restrictions that separated the financial industry into its three traditional roles: commercial banking, investment banking, and insurance underwriting. That private litigation—what I am calling “rival litigation”—targeted bank regulators with claims that they were allowing banks to engage in activities that were ultra vires. Those suits, brought by the securities and insurance industries slowed the unravelling of Glass-Steagall. The regulatory regime that replaced Glass-Steagall has not produced similar rival litigation challenging agency action. In this tribute to Professor Art Wilmarth, I examine the issue of constitutional and statutory standing in the Glass-Steagall era litigation and highlight the standing features of Wilmarth’s new Glass-Steagall proposal. Not only is standing critical to Wilmarth’s new Glass-Steagall proposal, but standing is a key, often underappreciated, design feature of any financial regulatory regime. I examine standing under the existing regime and discuss how changes in the industry and differences in statutory drafting have weakened the private enforcement benefits that derive from rivalry between and among interest groups