Identifying and Managing Systemic Risk: An Assessment of Our Progress
Steven L. Schwarcz: Although a chain of bank failures remains an important symbol of systemic risk, the ongoing trend towards disintermediation…
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Dodd-Frank
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Why the Federal Reserve is Dodd-Frank’s Big Winner
At the height of the financial crisis, pundits and politicians were telling us all to expect an overhaul of financial regulation that would result in a brand new financial system. Those of us who study such matters knew the term “overhaul” was a bit hyperbolic, but genuine reform was certainly anticipated, and some might argue that Dodd-Frank was that genuine reform. Despite all the ink spilled about the impacts of Dodd-Frank, the post-crisis financial structure fails to look dramatically different than before. If anything, the major change in the post-crisis financial regulatory system is an increasingly powerful Federal Reserve.
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Durbin Sticks to Guns, Chooses Slurpees Over Consumers: An Overview of the Durbin Amendment and Its Potential Adverse Impact on Consumers
Brandon Gold
When the chairmen of the Federal Reserve Board and Federal Deposit Insurance Corporation and the Acting Comptroller of the Currency express doubts about a regulation designed to eliminate seventy percent of a market, and when the queen and spokeswoman of consumer financial protection, Elizabeth Warren, refuses to comment on a financial rule supposedly enacted to protect consumers, one would expect a rational legislator to, at a minimum, delay such a measure until they could properly understand its ramifications. Dick Durbin, the number two democrat in the Senate, refuses to fit that mold. Instead, Durbin, the author of the self-titled “Durbin Amendment” to the Dodd-Frank Act, refuses to reconsider the legislation directing the Federal Reserve to limit debit card interchange fees and threatens to filibuster any bill brought before the Senate that seeks to delay its implementation.
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Harmony or Cacophony? A Preliminary Assessment of the Responses to the Financial Crisis at Home and in the EU
J. Scott Colesanti
To be sure, the recent reforms to the U.S. regulatory system are far from final. Even if House Republicans do not succeed in turning back the clock, the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) require so many studies, interpretations, and effectuating regulations that it will evade meaningful analysis for years. And while the nominally bipartisan Financial Crisis Inquiry Commission recently issued its report on causes for the financial crisis, that spirited document both spread the blame and disclosed infighting so as to cloud sufficiently any lasting impressions.
Separately, the European Union—tasked with confronting the same economic foes while facing its own legislative obstacle of supranationalism—has issued robust rounds of Directives, Regulations, and Recommendations. Similar to efforts in the United States, the culmination of these reforms will trigger debate about business regulation on that continent for years to come.
In Dodd-Frank’s Shadow: The Declining Competitiveness of U.S. Public Equity Markets
David Daniels
As we enter into 2011, things are looking up. The Dow Jones has recently broken through 12,000 and is climbing to pre-recession heights. The economy has emerged from the greatest downturn since the Great Depression and continues to show modest growth. Unemployment is slowly decreasing. But all is not well. A potentially worrying trend that gained traction at the beginning of the millennia continues to unfold: the decline of the competitiveness of U.S. public equity markets.
For example, consider the U.S. primary equity markets. In 2000, these markets attracted 54% of all global initial public offerings (IPOs)—IPOs by foreign companies issued on at least one public exchange outside the company’s domestic market. Similarly, foreign companies raised about 82% of the dollar value of all global IPOs on U.S. public exchanges.
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Consumer Casualties?
Amy J. Schmitz
On July 21, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), which among other things calls for creation of the Consumer Financial Protection Bureau (CFPB) to serve as a centralized agency charged with protecting consumers from lending abuses and improper practices. The question is when and whether this agency will come to fruition—or suffer as a casualty of political warfare.
This CFPB has instigated a firestorm among liberals and conservatives. Liberals raise the CFPB as an engine for consumer protection from rampant lender abuses and “big bad banks.” Conservatives denounce the Bureau as expensive regulatory fluff in a “leftist” campaign to take over private business.