Thursday, September 12, 2013
Financial Reform US Style
The Dodd-Frank bill was written in response to the financial crisis. The intent was to prevent a similar crisis in the future. The bill addressed most of the important areas that contributed to the financial crisis. I told one of my classes that the big problem with the bill was that government agencies were left with the problem of determining how the intent of the bill would be defined and implemented. There was little reason to believe that regulators, that had been captured by Wall Street, would take the necessary actions to implement the bill in the way in which it was intended. This article describes four important features of Dodd-Frank that are yet to be implemented according to the intent of the bill. We don't know when or how the next financial crisis will occur. What we do know is that we have not done all that we should have done to prevent it. Moreover, the Wall Street banks are still too big to fail. The government will be forced to rescue them in the next crisis. In the meantime the Wall Street casino is operating at full sail.