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The Financial Stability Oversight Council represented an innovative approach to the problem of systemic risk in the American economy. It also represented an innovative form of cooperative federalism. By grafting state regulators onto the Council as nonvoting members, Congress hoped this new federal super-regulator would draw upon a reservoir of state expertise and local knowledge so that the Council’s final decisions reflected a collaborative effort between the nation’s top experts at the federal and state level.

But looking back over the first decade of the Council’s operations, it is clear that this experiment failed to work as Congress intended. Federal decisionmakers consciously minimized the role of their state counterparts and asserted jurisdiction over America’s largest insurance companies, stepping confidently into an industry that was historically the prerogative of the states over the objection of the Council’s state regulator members. Ultimately, the D.C. district court vacated the Council’s overreach, citing the very same arguments pressed by state regulators that were disregarded by the Council during its deliberations. By publicly dissenting from the Council’s decisions, state regulators planted seeds of doubt that would ultimately lead the Council to abandon its efforts. The Council’s foray into insurance regulation reflected not the collaborative consensus of cooperative federalism, but a more discordant process in which state officials work within a federal system to resist policies with which they disagree—a phenomenon known as “uncooperative federalism.”

This Article critically examines the role that state regulators could, and did, play during the Council’s first decade of deliberations and explores the ramifications of that experience for theories of cooperative and uncooperative federalism. The Dodd-Frank Act’s experiment with integrating state regulators at the federal decision-making level did not work as Congress hoped, but it inadvertently revealed a powerful way that states can use tools of administrative law to protect state autonomy from agency overreach through the administrative safeguards of federalism.


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7 Sep 2022
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  • Subject
    • Administrative Law

    • Consumer Protection Law

    • Insurance Law

    • Law and Economics

    • State and Local Government Law

  • Journal title
    • Nevada Law Journal

  • Volume
    • 22

  • Issue
    • 1

  • Pagination
    • 303-347

  • Date submitted

    7 September 2022