Why the Dodd-Frank Act Didn't Work
On July 21, the Dodd-Frank Act turned three years old.
But, unlike most three-year-olds who can walk and talk, this one hasn't gotten out of the crib yet...
You see, the Dodd-Frank Act was a promise to protect Americans from the excesses and ruthlessness of Wall Street. It was meant to streamline the regulatory process.
But three years later, we are still waiting for its full implementation.
In fact, as of last week, only 155 of 398 rules required by this law are considered final.
That's because instead of focusing on the systemic problems that caused the crisis, the pen to write the bill ended up in the hands of disconnected agencies and lobbyists.
Instead of fixing the serious problems of current law, Dodd-Frank failed to curtail Wall Street - just a few years after a major financial crisis.
At a time when Sen. Elizabeth Warren, D-MA, and Sen. John McCain, R-AZ, have pushed for a new Glass-Steagall Act to reduce risk, some voices like Treasury Secretary Jack Lew argue that the Dodd-Frank bill will alleviate the problems of Too Big to Fail, systemic risk, and cronyism.
But we know that such arguments are spurious at best.
By Yanking the Teeth Out of Dodd-Frank Act Ratings Rules, SEC Blunts Hope for Real Financial Reforms
Make no mistake: The Dodd-Frank Wall Street Reform and Consumer Protection Act is a slippery political football.
But this early attempt at reform is actually just the kickoff for a political skirmish that will pit legislators, lobbyists and other hired guns against one another on the post-financial-crisis gridiron.
These ongoing reform efforts will turn into a long affair whose outcome is far from certain.
But investors can bet on this: The millions of dollars in lobbying money that's thrown at legislators every year in an attempt to influence the regulatory rulebook will certainly influence that outcome.
To understand the risks that a lack of reform resolve brings, please read on...