Dodd-Frank Turns Four

Suzy Khimm checks in on the impact of Wall Street reform upon Dodd-Frank’s four-year anniversary yesterday:

We’ve eliminated some of the causes of the last crisis, but that doesn’t mean we’ve prevented the next one. The toxic mortgage products that led to the last financial collapse have been all but eliminated from the marketplace. If anything, policy experts and advocates are concerned that federal officials have gone too far in tamping down mortgage risk. But the next crisis isn’t likely to resemble the last one. Faced with increased regulation and scrutiny in one sector, financial institutions will simply turn to other kinds of financial products. A post-recession boom in subprime auto lending and junk-rated corporate debt, for instance, have recently raised concerns that few had anticipated four years ago. Such risky loans will continue unless regulations are implemented and enforced more effectively, said [finance professor Anat] Admati.

Patrick Caldwell blames regulators and Republicans for failures in implementation:

Congressional Republicans have done everything in their power to stall the process. They’ve introduced bills to hamper rulemaking and, when that has failed, hamstrung regulators by holding back funding for the agencies, blocking their ability to hire the new employees necessary to write and enforce Dodd-Frank rules.

Peter Suderman, meanwhile, argues that the problem is excessive regulation within Dodd-Frank:

By its third anniversary last summer, the 848-page law had generated nearly 14,000 pages of new regulations, with who knows how many more in the lifetimes of rule-writing to come. … Dodd-Frank is not a law that was passed to do any specific thing, or even several specific things. It regulates all manner of minutiae: the particulars of debit card surcharges, mortgage qualification rules, bank capital requirements, energy company finances, and even disclosures on the corporate use of tungsten and other minerals from the Congo. In practice, it looks more like a law designed to do anything, and perhaps everything. Judging by the results, it’s hard not to conclude that the legislators behind the law did not really know what it was supposed to do at all.