This paper was presented at the State of the Federation Conference 2011 - The Changing Federal Environment: Rebalancing Roles? held in Montreal December 1-3, 2011.The paper was revised November 24, 2014.
Summary:This paper describes the factual context of the securities references, focusing particularly on the enormous contradictions in the evidence describing our existing system. It explains how those contradictions reflected the two competing visions of federalism in the securities references and why the courts were correct to reject the federal government�s factual assertions. It describes the rejected federal evidence as �constitutional rhetoric� � inaccurate descriptions, assumptions and criticisms designed to support a constitutional claim that, if valid, would have resulted in a seismic shift in the division of powers. If we look past that rhetoric, we see that our existing securities regulatory system not only excels but that it seems to excel because it is decentralized. The paper concludes by describing the securities references and the perpetuation of constitutional rhetoric by the federal government and its supporters, (including the Financial Stability Board and the International Monetary Fund) as examples of �constitutional risk� � the risk that a constitutional agenda may generate incentives for retrograde policy that override functional policy considerations. It calls for a more transparent process that would reduce constitutional risk by ensuring that constitutional proposals are not disguised as policy proposals as they were in the securities references.