ABSTRACT. This paper studies the use of judicial decisions in the balance between rules and discretion in financial matters. The starting point of this paper is the idea expressed by John Taylor that established rules are preferable to administrative discretion as a way to avoid financial, and other, crisis. Clear rules lower uncertainty rampant in financial, and other, crisis and permits stable decisions by economic actors. This original point is completed with the importance that judicial review has on the matter, since Judges at the same time can control the excesses of discretion and provide a debate for the changes of rules. Regulation through litigation indicates that any legal rule as approved by legislators or agencies is in reality a first draft since it could be rewritten in a judicial proceeding. The idea behind “regulation through litigation,” is that the threat of litigation and massive risks of liability will force behavioral change from government agencies and other defendants allowing the creation of better rules. pp. 48–69

Keywords: regulation, litigation, judicial review, financial crisis, discretion



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