Former Senator Kaufman: Dodd-Frank's Wall Street Reform Has Been an Abysmal Failure

Friday, 19 Jul 2013 08:13 AM

By John Morgan

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The anniversary of the passage of the Dodd-Frank Wall Street Reform Act beckons, but the measure has been a crashing flop, because Congress has short-changed it and a tidal wave of lobbying by big banks has blocked it, according to Ted Kaufman, a former U.S. Democratic Senator from Delaware and chair of the Congressional Oversight Panel on the Troubled Asset Relief Program.

The Davis Polk law firm estimated only 155 of the 398 regulatory rules required by Dodd Frank have been finalized as the third anniversary of the law occurs on July 21.

As a result, Kaufman said Dodd-Frank has not lived up to its promises.

Editor’s Note:
Put the World’s Top Financial Minds to Work for You


"By and large, those agencies charged with writing the regulations to bring the legislation to life have been overwhelmed by a combination of congressional underfunding and a massive lobbying effort by the megabanks that increasingly seem to control Washington," Kaufman wrote in a column for Forbes.

Part of the reason for the official ennui may be that the economy has improved and banks are making huge profits again, and, thus, the White House, Treasury Department and Congress see little cause for action.

"We have gone right back to the 'what, me worry' attitude we had until the day before Lehman Brothers went belly up," Kaufman explained.

He listed a host of reasons why Dodd-Frank has failed — the megabanks are bigger than ever and more than ever "too big to fail;" Fannie Mae and Freddie Mac problems have not been solved, despite the prominent role in the financial meltdown played by the quasi-governmental mortgage giants; and the Obama administration has maintained a Wall Street-Washington revolving door for political appointees.

Further, not a single megabank executive who contributed to the 2008 near-collapse of the U.S. economy has gone to jail; the banks are "still gambling with" consumer deposits; and the credit-rating agencies "still operate as they always have, bought and paid for by the entities they rate," Kaufman said in his blistering assessment.

However, Treasury Secretary Jack Lew promised on Wednesday the "core elements" of Dodd-Frank would be enacted and in place by the end of 2013, Reuters reported.

Lew said at CNBC's Delivering Alpha conference that it is especially crucial for regulators to impose a version of the so-called Volcker Rule, which seeks to limit risky trading by banks.

He maintained the U.S. government is determined to end the policy of too big to fail, whereby large financial institutions receive considerable government aid if they get into trouble, according to Reuters.

Editor’s Note: Put the World’s Top Financial Minds to Work for You

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