Proposed Fixes to Dodd-Frank Highlight Ongoing Battle over Financial Regulation

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PJMedia:

WASHINGTON – Two and a half years after the U.S. introduced the most significant overhaul to financial regulation in a generation, many of the rules have yet to be completed. Meanwhile, regulators, lawmakers, and the private sector continue to be at odds over the finalized regulations.

After the financial crisis of 2008, lawmakers sought to reduce the chances of another economic crisis by overhauling financial rules and creating new regulatory bodies to protect consumers from abusive lending and mortgage practices. After several months of negotiations between the two parties, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act in June 2010.

 

Dodd-Frank, which imposed the most significant reforms to the financial sector since the Glass-Steagall Act of 1933, touches almost every aspect of finance. The Act contains sixteen titles, each focusing on a major area of reform, including insurance, derivatives, and proprietary trading. One of the major goals of Dodd-Frank is to subject banks to a slew of regulations along with the possibility of breaking them up if they are deemed “too big to fail.” The law also requires that the largest financial firms build up their capital and liquidity buffers, obtain pre-approval for certain acquisitions, and place restrictions on the riskiest financial activities.

After the legislation passed, its supporters suggested that it would take roughly 12 months to finalize the rules. Two years on, those predictions seem overly optimistic.