Stoa 2019-20 TP: Defining Finance Policy (Part 1)
As a refresher, Stoa’s 2019-20 Team Policy resolution is
The United States Federal Government should substantially reform its banking, finance, and/or monetary policy.
This topic is a departure from the average, with three areas of reform instead of one. Two of these terms are relatively easy to define.
Monetary Policy
Monetary policy has no shortage of definitions. It is universally understood as the panoply of actions taken by the central bank to manage the money supply.
Banking Policy
While there is no official government definition of banking policy, the United States Federal Government codifies Banking Policy in Title 12 of the US Code and Congress also routinely uses the term when discussing policy issues.
Finance Policy
Finding a definition of finance policy is far more difficult. The term finance policy is almost never used, instead, we often hear about financial policy, a term typically used in the private sector in terms of defining how an individual company handles its finances. Even when I write this article, Grammarly wants to correct finance policy to fiscal policy because the term is so unnatural.
This has led to debaters taking a few different routes. Each problematic.
Route 1: Government Definition
Many have looked to the US government to find ANY possible definition of the term. If you dig deep enough, you’ll end up here. The Treasury Department contains an office within its office of domestic finance called, “The Office of Government Financial Policy”.
Yet, this office has extremely limited jurisdiction. It oversees two offices: The Office of Policy and Legislative Review and the Federal Financing Bank. When you look at their responsibilities, you see it is only related to the financing and oversight of other federal agency’s borrowing and lending programs. So, if the Department of Defense needs a loan, and they don’t have the money for it, they turn to The Office of Government Financial Policy. When you look at the example cases listed under Stoa’s description of the resolution, reforming Fannie Mae and Freddie Mac, the Dodd-Frank Act, money laundering, and more, it’s clear that we are looking at more than the government’s accounting.
Take the Dodd-Frank act as an example, it created the Consumer Financial Protection Bureau which is tasked with protecting consumers from financial abuse. According to Stoa, reforming this agency would clearly be topical, but The Office of Government Financial Policy doesn’t touch it.
Route 2: The Everything Interpretation
Some say that their case is topical because it “deals with government finances.” Well, cool. So does every government policy that requires funding. If the resolution was: “The USFG should substantially reform a policy that deals with government finances”, any government policy that spends money would be topical. It would be just as meaningful to say: “The United States Federal Government should reform its policy.”
The resolution uses specific language: finance, monetary, and banking policy. Surely it can’t be discussing every single kind of government policy at once. We all have some idea of what finance policy means, even if it can be tricky to nail down. Sretching the term to include everything isn’t the answer.
Route 3: Financial Systems
This gets us closer to understanding the term. Most who embrace this route use a definition which comes from the International Monetary Fund:
“Financial policies refers to policies related to the regulation, supervision, and oversight of the financial and payment systems, including markets and institutions, with the view to promoting financial stability, market efficiency, and client-asset and consumer protection.”
This definition isn’t perfect. It contains advocacy for what these financial policies should be promoting at the end. Good definitions should not contain any advocacy, only descriptions. But if you’re looking for a sourced definition, this is one of the best you’ll find.
Yet, it raises questions. What are financial and payment systems? Why only regulation, supervision, and oversight? Many offer some version of the following interpretation,
“Financial systems are the systems that govern how we use our finances.”
That sentence is just one big circle. It doesn’t go anywhere. So, how can we set a standard for finance policy? That’s what we’ll cover next week.
Have you heard any other unique definitions of finance policy? Let us know in the comments!