Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

All told, Dodd-Frank called on regulators and agencies to formulate 398 new rules for the financial sector. Each one became the target for no-holds-barred lobbying by interested parties, who could now operate outside the limelight of congressional debate. By July 2013, three years on from the passage of the law, barely 155 of the 398 required rules had been finalized.51 The highly controversial Volcker rule was a case in point.52 How to draw internal divisions inside banks to insulate client money from proprietary trading was a hugely technical and contentious business. Even with the best will in the world it was nearly impossible to draw a line between the actions of a bank in making a market for a client and trading on its own behalf. What emerged was less a “bright” regulatory line than a Rorschach blot. It took until December 2013 for the five agencies involved to agree on a wording of the basic Volcker rule, 1,238 days after Dodd-Frank was passed.53 The result was a 71-page document with an explanatory addendum that ran to a modest 900 pages. Banks were not so much told what to do as they were invited to demonstrate that they were not in violation of the rule. What exactly would constitute proof of compliance was a matter for further negotiation.54 The best advice the lawyers could offer was that it was up to banks to decide the level of “regulatory risk tolerance” they were comfortable with. After passing the law in July 2010 and issuing the “final” formulation of th...