## Book review — Private Finance, Public Power (Fabio Natalucci)

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**Canonical URL:** [Book review — Private Finance, Public Power (Fabio Natalucci)](https://www.imf.org/-/media/files/publications/fandd/article/2025/12/books-natalucci.pdf)

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### Overview
- Subject: Private Finance, Public Power: A History of Bank Supervision in America by Peter Conti-Brown and Sean H. Vanatta.
- Scope: Historical account of how bank supervision evolved in the United States over the past two centuries.
- Central thesis (as presented by the reviewer): U.S. banking oversight developed through institutionalized discretion and layering rather than deliberate design; public power negotiates continuously with private finance.

### Institutionalized discretion: strengths
- Institutionalized discretion defined: supervisory judgment embedded in an institutional structure that balances discretion with democratic accountability.
- Functions/benefits attributed to this model:
  - Enables supervisors to respond to emerging risks.
  - Allows tailoring of interventions to institution-specific conditions.
  - Permits interpretation of evolving norms and practices.
  - Enhances legitimacy because discretion is grounded in transparency and politically supported institutions.
  - Supports both financial stability and market dynamism.
- Historical evolution described:
  - Architecture of U.S. supervision (Office of the Comptroller of the Currency, Federal Reserve, Federal Deposit Insurance Corporation, state regulators) emerged by incremental adaptation rather than deliberate design.

### Limits and emerging vulnerabilities
- Structural and market changes challenging the model:
  - Growing share of financial intermediation has shifted beyond the regulated banking system to non-bank financial institutions (NBFIs), including asset managers, pension funds, insurance companies, private equity and credit funds, fintech lenders, and others.
  - Banks continue to provide liquidity, credit, and fee-based services to NBFIs, linking risks across sectors.
  - Fragmentation of regulatory and supervisory agencies compounds supervisory challenges.
- Role of the Federal Reserve:
  - Fed’s expanded crisis-management role has drawn it deeper into financial markets over the past two decades, including backstopping markets during the 2008 global financial crisis, emergency interventions during COVID-19, and the 2023 regional banking stress.
- Emerging vulnerabilities highlighted:
  - Fast-moving global financial flows.
  - Rise of digital finance.
  - Data gaps in the NBFI sector that hinder monitoring of risk migration beyond the traditional supervisory perimeter.
  - Rapid growth of private credit as an example of tension between innovation, market-structure evolution, and current supervisory approaches.
- Key caution: Without better data, discretion risks becoming guesswork.

### Policy implications and questions
- Core policy question raised: Is institutionalized discretion sufficient in an era of bank disintermediation, digital finance, and global capital mobility?
- Potential policy responses suggested by the review:
  - Rethink the supervisory and regulatory perimeter.
  - Expand the supervisory tool kit.
  - Clarify policy objectives governing supervision and regulation.
- Emphasis from the book: Effective oversight depends not only on the wisdom of discretion but also on the strength of institutions that wield it.

### Publication details and metadata from the review
- Reviewer: Fabio Natalucci, managing director and chief executive of the Andersen Institute for Finance and Economics.
- Book details as listed:
  - Authors: Peter Conti-Brown and Sean H. Vanatta
  - Publisher: Princeton University Press
  - Location: Princeton, NJ
  - Year: 2025
  - Length: 424 pp.
  - Price: $39.95

*DECEMBER 2025; F&D; book review by Fabio Natalucci.*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2025/12/books-natalucci.pdf_