Regulatory exemptions function as exploitable loopholes undermining enforcement

Evidence

Volcker’s second requirement is a key feature of an effective regulatory system: personal accountability for unlawful corporate practices. It shifts the major responsibility for adherence to the law from regulators to the officials managing the firms. Volcker also wanted vigilant regulators: “And I’d have strong regulators. If the banks didn’t comply with the spirit of the bill, they’d go after them.” The former senator Ted Kaufman, now a professor at Duke University School of Law, describes how adding exemptions to the rule opened a Pandora’s box of rules covering 300 pages: “Here’s the key word in rules: ‘exemption.’ … [A]s soon as you see that, it’s pronounced ‘loophole’” (Stewart, 2011). — Albert Bandura, Moral Disengagement, 1536

Categorization

• DEFINE: Defines what ‘exemption’ means in a regulatory context: a loophole.
• XREF: connects to: Consumer-protection transparency rules fail because banks manipulate the very form of simplicity — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 350; Trade agreements now serve as legal shields against domestic financial regulation — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 903; Frontline workers can preserve discretion through legal loopholes that bureaucrats cannot close (+3 more)