Financial Regulation

Dodd-Frank Financial Regulation: We'll Figure It Out When We Get There! Maybe!

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When President Obama signed the Dodd-Frank overhaul of financial regulation in the summer of 2010, he cast the law's passage in explicitly historic terms: "These reforms represent the strongest consumer financial protections in history," he said.

He had grand ambitions for the new rules and regulations, which he promised would, among other things, "rein in the abuse and excess that nearly brought down our financial system. It will finally bring transparency to the kinds of complex and risky transactions that helped trigger the financial crisis." Also, the law would make borrowing contracts simpler, end taxpayer funded bailouts, and provide "certainty to everybody, from bankers to farmers to business owners to consumers." 

How, exactly, would the law's many lofty goals be accomplished? Well, that was still yet to be determined. Initial counts indicated the law called for 67 new studies to be undertaken and for federal regulators to write 243 new rules. (Current counts have the number of new rules to be written at 398.) In other words, they had passed TBD legislation, and they would figure out how it all worked when they got there.

They're still trying to figure it out. And it's taking a little longer than planned. The Washington Examiner's Timothy Carney points us to the Davis Polk consulting group's latest progress report on the Dodd-Frank rule writing process. A couple of bullet points stand out:

  • Of these 237 passed deadlines, 145 (61.2%) have been missed and 92 (38.8%) have been met with finalized rules. Regulators have not yet released proposals for 31 of the 145 missed rules.
  • Of the 398 total rulemaking requirements, 131 (32.9%) have been met with finalized rules and rules have been proposed that would meet 135 (33.9%) more. Rules have not yet been proposed to meet 132 (33.2%) rulemaking requirements.

Is everybody feeling certain yet? Turns out rewriting the nation's financial rules and regulations is a little bit harder and more complex than most folks expected. That includes at least one of the law's key backers, Rep. Barney Frank (D-Mass.), who earlier this year grumbled that the Volcker rule created as a result of the law was probably too complex. "The agencies tried to accommodate a variety of views on implementation but the results reflected in the proposed rule are far too complex, and the final rules should be simplified significantly," he said. But don't worry. Our effective and perceptive federal financial regulators will get it figured out eventually, just like they always do.