Obama's Win Puts Dodd-Frank Reforms on Firmer Footing

Catherine Dunn

Corporate Counsel

11-08-2012

President Barack Obama’s re-election victory Tuesday night not only renewed calls for overcoming Washington gridlock, but it also uncomplicated one campaign trail question mark: the future of the Dodd-Frank financial reform law. 

Republican challenger Mitt Romney vowed to repeal the doorstopper legislation that regulates Wall Street post-financial crisis, but President Obama’s Electoral College win has essentially put an end to any such ideas. 

To get a sense of how in-house counsel in the financial sector should plan their post-election agendas, CorpCounsel.com checked in with Michael Krimminger, former general counsel of the Federal Deposit Insurance Corporation. Now a partner with Cleary Gottlieb Steen & Hamilton, Krimminger sat down with us in July to reflect on the two-year anniversary of Dodd-Frank. With the 2012 election now in the rearview mirror, Krimminger points out these top-line items going forward: 

Living Wills: As Krimminger explained to us before, the rules for living wills require financial companies to map out how they could be resolved under the Bankruptcy Code. The next set of deadlines for covered companies arrive in July and December 2013, so keep prepping accordingly.  

Capital Requirements: Be prepared for the finalization of rules related to capital requirements for banks. “I think the regulators are pretty determined to move forward and finalize those rules in the first half of 2013,” Krimminger says.

The Volcker Rule: Perhaps the most talked-about rule of Dodd-Frank—especially after J.P. Morgan’s multi-billion-dollar trading loss last spring—a bevy of regulators are still deciding just how they’re going to put restrictions on proprietary trading by banks. But Krimminger predicts the Volcker Rule could be finalized by end of the first quarter of 2013, as the principal agencies involved sort out their issues with one another.

Leadership Changes: Even as President Obama prepares for a second term, some familiar faces in and around his administration could be replaced in the near future. Treasury Secretary Timothy Geithner has previously said he wouldn’t stay on for a second term, and Securities and Exchange Commissioner Mary Schapiro’s tenure is up in 2014. “The SEC and the Treasury are obviously major players in these issues,” Krimminger says. 

Dodd-Frank Challenges: As regulatory agencies find their rule-making tested by the judiciary, Krimminger says a challenge’s success is most likely to hinge on whether a rule can withstand a cost-benefit analysis in court. He adds that the idea of applying a cost-benefit analysis to new rules “has support on both sides of the aisle” in Congress. 

Compliance Costs: Although many Dodd-Frank initiatives only affect the largest financial companies, “there are a number of issues that are beginning to percolate down to smaller financial institutions,” Krimminger says. So as now-familiar recovery plans, resolution plans, and stress tests come to be seen as “best practices,” smaller institutions will come to bear those compliance costs, as well, he says. 

See also: “Ex-FDIC GC on the Past, Present, and Future of Dodd-Frank,” CorpCounsel, July 2012.