Book Review: Private Finance, Public Power:

Private Finance, Public Power: A History of Bank Supervision in America. 2025. Peter Conti-Brown and Sean H. Vanatta. Princeton University Press.

In Private Finance, Public Power, Peter Conti-Brown, Class of 1965 Associate Professor of Financial Regulation at the Wharton School at the University of Pennsylvania and a nonresident fellow in economic studies at the Brookings Institution, and Sean Vanatta, senior lecturer in financial history and policy at the University of Glasgow, provide a fascinating history of US finance and public policy by examining the unique way the nation manages financial risk across the public-private divide of the banking sector. The public plays a key role in managing private risks, such as those that banks take. The authors describe the intense, combative dynamic among bankers, politicians, and bureaucrats in the public-private system of bank supervision over the past two centuries, from the founding of the Republic to 1980.

The authors chronicle the “institutional layering” and different supervisory frameworks that evolved over time, including the imposition of private liability on bank shareholders, the development of the central bank, and the creation of federal deposit insurance. Negotiations occurred at the federal and state levels, but the federal government ultimately assumed most of the responsibility for risk management. Federal supervisory officials also began to expand the taking of more residual risks, including monitoring racial discrimination, consumer protection, and community reinvestment over time. The authors adeptly describe how a diverse cast of actors navigated two hundred years of financial panics, scandals, and crises to build the modern American banking system.

The authors rightfully stress that conflation of regulation and supervision is an error that obscures what makes public supervision distinct within the American system of private finance. Bank supervision, a dynamic space, is not writing the rules that implement congressional actions, but rather institutionalized discretion used to manage residual financial risk as it occurs in individual private banks and across the private banking system.

The book provides four basic insights that industry practitioners will find useful. First, supervision is about the relationship between individual actors in government and individual financial institutions, where public power meets private finance. Second, supervision is defined by evolutionary processes and is resistant to efforts to impose a single defining ethos. Third, supervisors and Congress use supervisory discretion to choose among competing conceptions of what that individual relationship should be. Fourth, institutionalized supervisory discretion works as a risk absorber for the entire financial system.

My two favorite chapters are Chapters 5 and 9. Chapter 5 covers one of the biggest tests in the history of supervision, the Bank Holiday of 1933. This chapter is the fulcrum of the book, placed between the origins of supervisory institutions and the solidification of risk management and discretion as the institutions’ most important purpose. Chapter 9 provides a great discussion of how civil rights and consumer protection became key parts of the supervisory apparatus. The chapter highlights Congress’s desire to increase the paradigms of supervisory discretion into areas beyond micro- and macroprudential risk. Following a pattern of institutional layering throughout the book, federal supervisors’ failures to adequately manage civil rights in finance led Congress to give them more tools through the Community Reinvestment Act.

The book does not provide a comprehensive history of bank supervision to the present, as it stops in 1980 due to the changes from the neoliberal consensus starting around 1979. These changes include the rise of the Federal Reserve as the preeminent financial supervisor, with a preference for stability through monetary policy, the dramatic expansion of non-prudential categories of bank supervision, including consumer privacy protection and anti-money laundering, and the crystallization of capital regulation as the primary mechanism for prudential regulation.

Private Finance, Public Power is a book primarily written for scholars of financial regulation in law, economics, political science, and history, as well as for bank supervision’s stakeholders and participants across the public-private divide. However, the book provides key insights to general finance industry practitioners, especially given the recent 2023 US banking crisis.