Caught between Frontstage and Backstage

The Failure of the Federal Reserve to Halt Rule Evasion in the Financial Crisis of 1974

Bibliographic Data

ID4522715
AuthorsPierre-Christian Fink (0000-0002-4583-1153, Harvard University and Hebrew University Jerusalem, corresponding author)
Year2023
Volume88
Issue1
Pages24-52
Publication date2023-02-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueAmerican Sociological Review (JOURNAL)
Journal identifiersISSN: 0003-1224 • E-ISSN: 1939-8271
PublisherSAGE Publications Inc (PUBLISHER)
DOI10.1177/00031224221131478
OpenAlexW4307641526
LanguageEN
Citations received7
References cited88

Rule evasion by companies is a major driver of change in contemporary market societies. Recent research holds that periods of market instability offer opportunities to bring rule evasion under control because crises expose hidden market practices. Based on original archival evidence from the financial crisis of 1974, this article shows that rule evasion is disclosed not automatically, but strategically and selectively. To explain the ensuing dynamics, the article develops a Goffmanian framework in which regulators learn of a crisis of rule evasion backstage (in their interactions with companies) but use a conventional definition of the situation frontstage (in their presentations to the public). In an as yet unrecognized outcome, the regulators may find themselves caught between frontstage and backstage: their communications to the public limit their room for maneuver against the companies backstage, forcing them to repurpose their extant crisis-management tools. Because regulators publicly pretend to stay within their mandate, this form of crisis response renders re-regulation of rule evasion less likely. The finding contributes a new explanation for a central puzzle in the burgeoning sociology of crises: why periods of instability so rarely lead to change

Business · Control (management · Economics · Evasion (ethics · Extant taxon · Financial crisis · Keynesian economics · Law and economics · Management · Mandate · Market economy · Political science · Auditing, Earnings Management, Governance · Corporate Finance and Governance · Law · Risk Management in Financial Firms

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