Too big to fail remains, reforms languish
It has been five years since the approval of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Congress passed the act in response to the abusive trading practices that led to the financial collapse and the Great Recession, second only to the Great Depression in its scope and long-term consequences for the United States and world economies.
Yet key provisions of the law have not been implemented or are inadequately enforced, a new Public Citizen report shows. The report, “Dodd Frank Is Five: And Still Not Allowed Outside the House,” documents the poor implementation of the law.
“Five years after President Barack Obama signed this legislation, Dodd-Frank remains largely incomplete,” said Bartlett Naylor, Public Citizen’s financial policy advocate and author of the report. “Major portions of the law have yet to be codified into specific rules. Many enforcement dates are set well into the future, and certain rules are not yet being implemented and enforced to the fullest extent of the law.”
The report notes that of the 390 rules required by the law, fewer than two-thirds have been completed; 60 rules have yet to be finalized, while another 83 have not even been proposed, according to a tally by law firm Davis Polk.
The failure to implement this federal law shows the power Wall Street has over the political system, providing tens of millions of dollars in campaign donations to Republicans and Democrats alike. In the wake of the risky trading, reckless lending practices and rampant deception that led to the financial collapse, the Obama administration should have implemented the Dodd-Frank reforms expeditiously and Congress should have cooperated.
Instead, it has appeared a low priority for the White House and faced resistance in Congress.
Named for former Connecticut Sen. Chris Dodd and the former House leader Barney Frank, the intent of Dodd-Frank was to assure that America would never again face the choice of either plunging into a depression or bailing out banks “too big to fail.” The report concludes that instead, little has changed.
Industry-cozy regulators and members of Congress hungry for campaign contributions continue to delay and weaken the law.
The report reviews the Volcker Rule ban on short-term speculation. It revisits the critical, but now-repealed, provision that would have required the risky practice of swaps speculation to take place outside of taxpayer-backed banks.
Also reviewed were the rules intended to bar executive pay schemes that reward high-risk, high-reward investing by banks with other people’s money, and the powers that would allow regulators to break up major financial institutions to avoid a pending economic calamity.
In many cases, the report finds, regulators have either failed to finalize rules, granted exemptions and lenient compliance phase-ins, or ignored powers granted by Congress.
“Regulators and lawmakers who put Wall Street interests ahead of public interests aren’t fulfilling the law’s intent,” said Lisa Gilbert, director of Public Citizen’s Congress Watch division. “Instead of rolling back key provisions, our officials should be taking full advantage of this important Wall Street reform law to protect Main Street financial markets.”
Rather than focus on the theater of the absurd that is Donald Trump, or settling for hackneyed claims that less regulation will magically create income growth for average Americans — rather than invite more abuses — voters and the media should be demanding to know whom candidates stand with, the powerful or the people.
So far, the powerful appear to be holding sway and, given the lack of true reform, the people could get burned again.
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