July 18, 2011

After 1 year of the Dodd-Frank financial reform law — what good has it done?

Bloomberg editorial:
Consumer advocates, many congressional Democrats and some economists say banks are still too big, the derivatives market remains untamed and opaque, and regulators have been slow to write hundreds of rules. The financial industry and Republican lawmakers, on the other hand, say regulators have gone overboard, hobbling financial firms with onerous demands, creating regulatory uncertainty and slowing the economic recovery.

51 comments:

gerry said...

Are Barney Frank and his cronies in the Freddies in jail yet?

Big Mike said...

Barney Frank, Chris Dodd, Barack Obama, Nancy Pelosi, and Harry Reid have a totally reverse Midas touch -- everything they do turns to sh*t.

Bruce Hayden said...

The biggest banks are still too big because they were somewhat exempted from the regulation, plus the regulations make them better able than their smaller brethren to compete. The smaller banks are, not surprisingly, the ones that have the hardest time conforming to the new regulations.

Which, given that the authors of the legislation were also greatly responsible for the financial meltdown in the first place, and were essentially owned by the biggest financial institutions, is not the least bit surprising.

AJ Lynch said...

Umm I bet it created a lot of jobs in Washington, DC! You know jobs like lobbyists, govt regulators and lawyers not to mention the pages and pages of printing produced by govt printshops.

Sloanasaurus said...

It's a disaster. It's part of Obamanomics three-legged stool: 1. Higher Taxes. 2. Anti-busines regulation. 3. Debt.

NYTNewYorker said...

It's only goal was to extend the reach of Big Government.

For liberals that is the good.

What does it actually do? Ha, surely you jest.


P.S.- Dodd and Frank belong in chains yet one moves on to another prestigious and lucrative position in Hollywood and the other continues to rule us with a sanctimony that is gag inducing.

Both skipping along leaving the catastrophic financial mess that they were instrumental in causing, in their wake.

Scott M said...

The real problem with Dodd-Frank is that only Dodd is gone so far.

Rialby said...

Rational Change!

The Drill SGT said...

regulators have been slow to write hundreds of rules.

snip...

creating regulatory uncertainty


buried in that is some agreement.

The markets loath unknown unknowns. If you don't know how much regulation that your regulator is ultimately going to burden you with, nor the nature of it, you can't take a position on either side of the risk boundary.

Tell them the rules, in advance...

BTW: The CIA interogators have the same issue, that's why the CIA is out of the interogation business.

Hagar said...

Fred Thompson, "... and here we are again, trying to fix the results of the last time we tried to fix this problem."


("And thanks for putting it back the way it was, Perfessor!")

David said...

How do we know? They can't even get the regulations written.

Because they don't know what they are doing!!!

David said...

Oh no/

Althouse caves!

The old comment format is back.

george said...

It shows the value of a co-opted press that the prime architects of the meltdown in the housing market, Frank and Dodd, were allowed to meddle in yet another area instead of being held to account for the destruction they caused.

Joe said...

(The Uncredentialed, Crypto Jew)

It’s, as Russell Walter Mead calls it, the failure of the Blue Model Regulatory State; that the State can craft rules that cover all eventualities, in a timely and effective manner. The reality is, that it is IMPOSSIBLE to do so. Reality and the markets move well within the OODA Loop of the Regulators.

ndspinelli said...

And..we now get to pay debit card fees, fucked again by the government w/o even getting kissed.

Frank said...

Although I have not spent time on most aspects of H.R. 4173, as a certified appraiser, I am painfully aware of the lame attempt at appraisal reform in the Dodd-Frank Act. The Appraiser Independence language effectively prevents independent appraisers from maintaining long-standing business relationships with sources of appraisal assignments, and provides a windfall to Appraisal Management Companies (AMCs).

Although the act provides for state registration and regulation of AMCs, that won't happen for a few years, and AMCs owned and operated by banks are exempt from state regulation. The first appraisal related rules promulgated as a result of the act by the Federal Reserve are tilted heavily in favor of big banks and their affiliated AMCs.

From an appraiser's perspective, Dodd-Frank is a bust, not only for my profession, but for borrowers and homeowners.

roesch-voltaire said...

Well the lobbyists help write the bill and the result was according to The Examiner:"If your goal were to foster more political cronyism, reward lobbyists, entrench incumbents, enrich the politically connected, and get the revolving door spinning faster, you would have a hard time crafting a more useful piece of legislation than the Dodd-Frank financial regulation bill."
That sums it up.
Read more at the Washington Examiner: http://washingtonexaminer.com/blogs/beltway-confidential/2011/06/durbin-tester-lobbyists-and-dodd-frank-corruption-machine#ixzz1SSweT6WW

galdosiana said...

I am convinced that we don't even care about real financial reform. Take this piece in the WSJ: Get ready for a 70% marginal tax rate. I think the quote about the teacher ought to hit home more than anything else for a variety of people:

Take a teacher in California earning $60,000. A current federal rate of 25%, a 9.5% California rate, and 15.3% payroll tax yield a combined income tax rate of 45%. The income tax increases to cover the CBO's projected federal deficit in 2016 raises that to 52%. Covering future Social Security and Medicare deficits brings the combined marginal tax rate on that middle-income taxpayer to an astounding 71%. That teacher working a summer job would keep just 29% of her wages.

Crazy.

Rialby said...

Go read your Amity Shlaes. I happened to read "The Forgotten Man" just as we began this mistake called the Obama Administration. It couldn't have been more prescient. FDR could not end the Depression because he created so much uncertainty - nobody knew wtf he was going to do next.

Here's an excerpt:

At some points Roosevelt seemed to understand the need to counter deflation. But his method for doing so generated a whole new set of uncertainties. Roosevelt personally experimented with the currency — one day, in bed, he raised the gold price by 21 cents. When Henry Morgenthau, who would shortly become Treasury Secretary, asked him why, Roosevelt said that “its a lucky number, because its three times seven.”

Barack Obama is the true inheritor of his legacy.

Scott M said...

one day, in bed, he raised the gold price by 21 cents. When Henry Morgenthau, who would shortly become Treasury Secretary, asked him why, Roosevelt said that “its a lucky number, because its three times seven.

This is exactly the sort of thing one does when playing one of the many super-complex empire building games out there (commonly referred to as 4X games). In other words, the people making these decisions are treating our economy like a giant sim.

Joe said...

(The Uncredentialed, Crypto Jew)


Well the lobbyists help write the bill and the result was according to The Examiner:"If your goal were to foster more political cronyism, reward lobbyists, entrench incumbents, enrich the politically connected, and get the revolving door spinning faster, you would have a hard time crafting a more useful piece of legislation than the Dodd-Frank financial regulation bill."
That sums it up.


Or Cap and Trade or ObamaCare R-V…Funny, you usually seem a “Progressive;” don’t you realize that all this cronyism is a FEATURE, not a Bug, of the Large-Scale Progressive Regulatory State?

Thanx for signing on to criticize Dodd-Frank, it deserves it, but just realize that Dodd-Frank is REPRESENTATIVE of Washington’s work, not an anomaly…to include the Clean Air/Clean Water Acts and Americans With Disabilities Act…Sen. Simpson got “hi sulfur” coal into the Clean Air Act, originally, making Wyoming coal the BEST coal, but dis-enfranchising Ky or WVA coal…geee it just “happened” Simpson was from Wyoming….Cap and Trade is supported by Exelon, which runs a large number of Nuclear Plants….gee that wouldn’t benefit them would it? Or the fact that regions that voted for Obama get subsidized credits for Cap and Trade and energy producing areas, that DIDN’T vote for Obama, have to pay for those credits…Purely coincidental.

Bottom-Line: shed the reflexive Progressivism, and realize that transparency, efficiency and equality is much better served in a market/Conservative model of Governance than the regulatory night mares you generally support, in your politics.

roesch-voltaire said...

Joe, I try to take it one bill at a time, and Dodd-Frank is a bad one, but I am for more support for the clean water act for example--sometimes they get it right because in this area the market place only kicks in after folks have suffered from contamination and struggle to prove it in the courts.Given the cozy relationship between the lobbyists and Congress, I do not see the transparency you think will happen in an unregulated market so I feel there is a place for consumer protection through regulations.

Joe said...

(The Uncredentialed, Crypto Jew)


Given the cozy relationship between the lobbyists and Congress, I do not see the transparency you think will happen in an unregulated market so I feel there is a place for consumer protection through regulations


R-V there is NO difference between Financial Regulation and Clean Water….you just THINK there is one…”oh but one is about home-ownership and banking, but the other one is about CLEAN WATER!” No they are BOTH about power and money….using the government to “rent seek” for the benefit of “my” industry. You just don’t think that there is a regulatory-industrial complex when it comes to something as “important” as water….

traditionalguy said...

Dodd-Frank is a claim from DC to have power over the Financial markets.

It is only needed because the Dodds and the Franks blew up the financial world with the intentional creation of a mortgage bubble of loans at !00% and no mortgage insurance starting in 1999. So it is Dodd and Frank who take power over finance to fix it by stopping it.

It is the Obama Socialists Method of Operation.

The ATF/Justice Dept blew up the gun marketing into Mexico from the USA and they are claiming that they have to take power over gun marketing in the USA to fix it by stopping it.

The Gulf offshore oil well drilling blow out, whether accidental or intentional, is now used to take power over the drilling of oil offshore to fix it by stopping it.

BUT, the Obama fascists eventually restart these stopped industries as business diercted only to cronies in exchange for contributions to Dems and their front organizations.

The end result is socialism in charge in the USA, because all of the free and private competitors are eliminated.


ObamaCare phase in follows exactly the same MO.

Power to permit existence is being taken by fascists in DC under the supposedly "Incompetent" Obama.

His is not incompetent conduct. His is a goal oriented deception that gets an A+ grade from Socialists the world over.

TosaGuy said...

I am getting rich on my penny per share dividends on my bank stocks, which I stupidly still own.

edutcher said...

And I will bet Slobbering Barney and the Friend of Angelo and all their friends will get very rich off it.

WV "debra" What a topless dancer always forgets.

Rick Caird said...

It was always hard to see how Dodd-Frank addressed the real problems of the financial crisis. All the new regulatory functions were less about the causes and more about government power. Dodd-Frank used the Pelosi-Reid-ObamaCare legislative model of "don't let anybody actually read the bill".

Both Christopher Dodd and Barney Frank are corrupt legislators. It is to be expected they created corrupt legislation that failed to address the problem they claimed to be targeting.

LarsPorsena said...

"..You just don’t think that there is a regulatory-industrial complex when it comes to something as “important” as water…..."

Love the phrase 'regulatory-industrial complex'. I'm stealing it and plan to use it in the future without attribution.

LarsPorsena said...

"...one day, in bed, he raised the gold price by 21 cents. When Henry Morgenthau, who would shortly become Treasury Secretary, asked him why, Roosevelt said that “its a lucky number, because its three times seven..."

..and then when FDR found out he couldn't control the market for gold, he made holding it illegal.
Legislate it, regulate it, tax it, and when all else fails abolish it.

Joe said...

(The Uncredentialed, Crypto Jew)


Love the phrase 'regulatory-industrial complex'. I'm stealing it and plan to use it in the future without attribution


Feel free, it’s what the Intarwebz are for….

Phil 3:14 said...

I've never understood how "consumerism" as a movement moved to the left of center. I mean weren't the bourgeoisie disdained by Marx. Didn't all of those '60's radicals rail against middle class morality

Maybe its what happens whenever you take a grassroots movement and try to institutionalize and codify it.

So as a result I get "safe" but impenetrable packaging. And when I tear it open with a knife its no longer safe (and I cut myself on the jagged edge).

So are the new consumer protection financial regulation like that but now instead of a nasty cut, I can't get a loan?

Scott M said...

So are the new consumer protection financial regulation like that but now instead of a nasty cut, I can't get a loan?

...and never, EVER, fold up the stroller with the baby still in it.

Joe said...

(The Uncredentialed, Crypto Jew)


...and never, EVER, fold up the stroller with the baby still in it


Or drive with the sun shade in the wind screen.

Dan in Philly said...

Congress: Using 18th century means to solve 21st century issues.

As an accountant, I can tell you the real problem is with the concept of taxing and regulating income, which has become so complex and fractured that anything written into law is instantly obsolete and any regulations are written by unaccountable and unelectable technocrats.

There is zero chance that any law congress passes will have the result they intend, the world is just too complicated to go along with such crude and blunt means such as laws. Congress gets to pass what amounts to meaningless words which only make lawyers and accountants rich and inconvience business. Inconvience is ok with big companies which can afford such overhead more easily, but smaller companies get washed out by them.

History is determined through economics, which congress isn't addressing, and cannot address.

DKWalser said...

I don't think the public has realized the potential reach of Dodd-Frank. It goes far beyond the lending practices to include the regulation of people and businesses that no one (until now) considered part of the financial sector. For example, the feds now have the authority to regulate payment agreements between professionals and their clients. Suppose, for example, an orthodontist wants to allow parents to pay for their kids braces over time. Under Dodd-Frank, such an arrangement would require pre-approval from the feds. Any agreement by the parties to modify the terms of the payment plan would require pre-approval from the feds. Which orthodontist offices will be large enough that they can afford the costs of getting their payment plans (and any subsequent modifications) pre-approved by the feds?

In theory, the new rules would even apply to the standard retainer billing practices of most law and accounting firms. A retainer is, in effect, a deposit and is a form of a financing arrangement between professionals and their clients. Dodd-Frank gives the feds the authority to regulate such consumer financing arrangements.

Scott M said...

the world is just too complicated to go along with such crude and blunt means such as laws

It worked fairly well for Hammurabi. We've just made it a tad more complicated.

Joe said...

Dan in Philly is right. Government gives lip service to small business, but their actions destroy it.

What we need is an alternative to paygo; every law must put accountants and lawyers out of work.

Michael K said...

Dodd-Frank, like Sarbanes-Oxley, are about shooting the wounded after he battle. They could not have prevented the crisis, which occurred despite the SEC, Moody's and the rest of the existing regulatory structure. Now, they are impeding recovery.

I do wonder how Bloomberg got rich with views like those of his publications.

sorepaw said...
This comment has been removed by the author.
SunnyJ said...

The only thing functional about the Dodd/Frank law is the name.

It serves the function of reminding us who did this and who is not being held accountable.

If you think there's a debt crisis now, wait until the funds that have been going to keep the truth of Fannie/Freddie out of the headlines are cut,capped and balanced out of exist.

You are going to hear the pigs squealing like never before.

The real financial crisis coming is the end of the government support for paying off private debt for the elites.

AJ Lynch said...

Joe said:
"Or drive with the sun shade in the wind screen."

Heh. That may be my all time favorite example of govt over-reach. And it made me laugh when I saw that the 1st time and laughing is good.

kimsch said...

It should be called Frank-n-Dodd - it is a total monster...

wv: regro

If we could get rid of Frank-n-Dodd we could regro this economy.

Kirk Parker said...

"never, EVER, fold up the stroller with the baby still in it"

Do you have any idea how much of my precious, irreplaceable time this new regulation wastes???

Revenant said...

banks are still too big, the derivatives market remains untamed and opaque, and regulators have been slow to write hundreds of rules

regulators have gone overboard, hobbling financial firms with onerous demands, creating regulatory uncertainty and slowing the economic recovery.

These two sets of beliefs are not in conflict. For example, one source of uncertainty is that the industry knows draconian rules are on the way but -- because the regulators are slow and there's little transparency -- nobody knows what they will BE.

sorepaw said...
This comment has been removed by the author.
cubanbob said...

Every bank that failed was a regulated bank and its loans at one point blessed by the regulators.

Dood-Frank isn't the exeption, its the norm. Its beyond the both Congress's paygrade and the executive and judicial branches paygrades to try to create a regulatory scheme where it is beyond their ability to have a deep nderstanding of the matters at hand. The regualtory state needs to flushed down the toilet and instead ought to be regulated by the market and clear torts, frauds and criminal codes. Too much power in government is the problem and the result is the coruption and quasi fascism we are slipping in to.

ken in sc said...

Back in the early 80s, I was supervisor of a word processing center (previously called 'typing pool'). We frequently had need to produce documents on unexpected deadlines that would require overtime for typists. Overtime was voluntary and no one would volunteer because it would kick them into a higher tax bracket and cost them more money than they would earn. This caused me a lot of headaches and chewing outs from my boss. There was nothing I could do about it until Ronald Reagan changed the tax tables—blessed be his name. It seems we are going back to the dark ages—glad I am retired now.

Firehand said...

Even if it weren't a bunch of corrupt bastards writing this stuff, ever notice how, every time they decide to 'save' us, it makes things worse?

We could dump at least half of the federal laws on the books and all we'd notice is life being somewhat easier for most people.

virgil xenophon said...

Joe/Dan in Philly:

I'm with you all the way. Large Corporations like GE or GM NEVER oppose all but the most onerous regulatory schemes because they fear retaliation with REAL killer regs and figure they can just "bill over" the problem by adding 50 cents to the price of everything they produce, etc., to pay for all the additional CPAs they'll have to hire and new computers they will have to buy to cope with the new regs. For the small businessman, by contrast, the cost of dealing with the same reg may be equivalent to his yearly personal contribution to his 401k or HR-10 plan.

(BTW, a 1982 study of the Congressional staffs dealing with tax and regulatory legislation found their avg. age to be 26 and the biggest asset they owned was their car--no annuities, stocks, bonds, cash value Life insurance or mortgages (all rented) --and most had never spent A MINUTE in the real world, having gone straight from grad-school to the Congressional staffs. )

BTW, the ONLY TIME the regulatory burden became too much for the big kids (prior to Obamacare)was the infamous "Section 89" legislation on Pension/fringe benefits for --ready for it--Health Ins (sound familiar?) and keeping proportional tests of contributions balanced for every new hire viz the entire workforce, etc. They're weren't enough computers in the world to calculate that on a daily basis and the screams were so loud it was repealed outright before even going into effect--the ONLY SUCH REG IN HIST TO BE REPEALED IN TOTO AFTER ENACTMENT BUT PRIOR TO ENFORCEMENT (iirc) Was ALSO passed in the dead of night w.o. A SINGLE Congressional hearing; and it's 2 authors--the Congressional staffers whose brainchild it was--then quit to start a consulting firm to advise industry on how to cope with the very regs they themselves wrote--can't get more opportunistically cynical than that..

(Google Sec 89)

PETER V. BELLA said...

The Dodd Frank law allowed the criminals- Dodd and Frank to cover up the mess they made. It should be called the Biden, Dodd, Frank crime cover up.

Saint Croix said...

You would be hard pressed to find two people more responsible for the collapse of the American economy than Barney Frank and Chris Dodd. They created the subprime mess.

Now look what they did...

The Fed is said to be terribly worried that -- because of provisions in the Dodd-Frank law -- it will no longer be able to rescue a money-market fund if it "breaks the buck," as the Fed did famously the day after Lehman Brothers Holdings Inc. filed for bankruptcy.

And of course Dodd=Frank gives one man--a "czar"--authority over all the banks. Holy shit.