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31 Stan. J.L. Econ. & Bus. 1 (2026)

handle is hein.journals/stabf31 and id is 1 raw text is: STANFORD JOURNAL OF LAW, FCONOMJCS & BUSINESS VOL.31 No.1 FINANCIAL STATECRAFT GRAHAM S. STEELE* ABSTRACT The purse is mightier than the sword. In recent decades -from the Cold War to the War on Drugs to the War on Terror to Russia's invasion of Ukraine-financial institutions have increasingly become the conduits for the United States government's foreign policy. This Article argues there are deep and under-appreciated connections between the use of money and credit to influence geopolitics, which this Article terms financial statecraft, and the goals of financial regulation. This Article begins by establishing aframeworkfor understanding the partnership between banks and the government in service of financial statecraft. Next, this Article engages in a critical examination of financial statecraft using the examples of global banks, sovereign debt and U.S. dollar markets, and cryptocurrencies. These cases help to clarify the complex relationships between the geopolitical objectives of financial statecraft and the domestic, stability-focused goals of financial regulation. They illustrate the tradeoffs between financial statecraft's competing aims of promoting access to U.S.-supplied money and credit while ensuring compliance with legal restrictions against money laundering and economic sanctions. They also demonstrate the tensions between the U.S. government's desire to leverage the competitive advantages ofU.S. financial institutions tofurther its foreign policy and regulatory agencies' mandates to preserve the safety and stability of the U.S. financial system. This Article concludes by proposing regulatory and statutory reforms to integrate financial statecraft and financial regulation into a single, coherent regime. Conducting internationally focused statecraft without proper regard for domestic financial regulatory considerations can undermine financial stability. Conversely, successful domestic financial regulation requires consideration of the impact of geopolitics on financial markets and institutions. Ultimately, financial statecraft and financial regulation mutually benefit from financial market integrity and financial stability. * The author is an academic fellow at the Rock Center for Corporate Governance at Stanford Law School and a senior fellow at the Roosevelt Institute. The author served as the Assistant Secretary for Financial Institutions at the U.S. Department of the Treasury from 2021 to 2024 and the Chief Counsel for the minority staff of the U.S. Senate Committee on Banking, Housing, and Urban Affairs from 2015 to 2017. For their thoughtful comments and feedback, the author would like to thank Hilary Allen, Dan Awrey, Robert Bartlett, John Crawford, Jeremy Kress, Michael Klausner, Sandy Mayson, Patricia McCoy, Saule Omarova, Frank Partnoy, Sarah Bloom Raskin, Ganesh Sitaraman, Mark Van Der Weide, Pierre-Hugues Verdier, William Weightman, Arthur E. Wilmarth, Jr., and Jeffrey Zhang and the participants in the Law and Macroeconomics Conference at the University of Michigan and the Wharton Financial Regulation Conference at the Wharton School of the University of Pennsylvania. Finally, the author would like to thank the editors of the Stanford Journal of Law, Economics & Business for their thorough review, excellent feedback, and patience throughout the editorial process. I STANFORD JOURNAL OF LAW, ECONOMICS & BUSINESS VOL.31 No.1