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Reflections on Dodd-Frank, Two Years Later
Two years ago this week, the largest financial reform package in U.S. history became law: the Dodd-Frank Wall Street Reform and Consumer Protection Act. Passed in the wake of the 2008 financial crisis under a highly partisan vote count (just three Republicans voted yay in the House of Representatives), the doorstopper law prescribes regulations on everything from derivatives and conflict minerals to the creation of the Consumer Financial Protection Bureau.
Former Senator Christopher Dodd (D-Connecticut), now chairman and CEO of the Motion Picture Association of America, told the Association of Certified Fraud Examiners last month that he doesnt actually like having his name on the bill, according to Accounting Today: Its not that I dont want to have my name associated with it. I just think it personalizes these matters in a manner Im not enamored of.
The Regulators (Past and Present)
SEC Commissioner Troy Paredes last week told the Society of Corporate Secretaries & Governance Professionals: I have been and remain troubled that the Dodd-Frank regulatory regime goes too far, The Daily Caller reported. Paredes went on to say that regulators have to be wary of the unintended consequences of their choices. In other words, the SEC must engage in rigorous cost-benefit analysisrooted in economics and the available datawhen fashioning the securities law regime, he said.
What Dodd-Frank has succeeded in doing is replacing the financial crisis with a regulatory crisis, Wayne Abernathy, executive vice president for financial institutions policy and regulatory affairs at the American Bankers Association, told The Fiscal Times. He also said regulators are bogged down in the rule-writing process instead of monitoring companiesand that with so much room for subjective judgment about bank practices, theres no end in sight for rule implementation. Its like downtown Manhattanit will never be finished, he said.
The Birds-Eye View
If theres one thing Davis Polk & Wardwell associate Gabriel Rosenberg has observed in his time working on the firms Dodd-Frank Regulatory Tracker, its that writing regulations is really, really hard. And the reason is the huge number of interconnections between any rules youre going to create, he says. Recently, the firm tabulated that every page of the Dodd-Frank Act has generated 10 pages of rule-writingamounting to 8,843 pages of rules and regulations as of July 1. The amount of work that's been done over the past two years is just so enormous, he says. And were not done.