Life has returned to normal, or at least what passes for the “new normal”, on Wall Street in the twelve months since Dodd-Frank was passed.
The Obama Administration credits themselves, and the adoption of comprehensive financial regulatory reform, for this mostly positive state of affairs. For those who believe excessive risk-taking on Wall Street was at the heart of the global financial crisis, sweeping reform on a scale not seen in 80 years was the necessary remedy to insure that a similar financial meltdown does not occur any time soon.
However, this is not a view uniformly held in Washington DC, let alone across the country. In fact, numerous bills are currently floating around Capitol Hill with one shared goal: the effective dismantling of Dodd-Frank.
President Obama also faces a prolonged confirmation battle over his appointment of Richard Codray to chair the Consumer Financial Protection Bureau, the new watchdog that is a key component of Dodd-Frank’s new regime. Republican Senators have made clear that confirmation would not be possible until the structure of the CFPB was changed and its powers diluted.
Obama has pledged to defend Dodd-Frank from these attacks, but the incredible vastness and complexity of the law may prove to be its Achilles heel. Even though the various government agencies (such as the SEC and the CFTC) entrusted with bringing Dodd-Frank to life, by way of numerous new rules and regulations, still have much work to be done, millions of dollars are being spent each week by lobbyists to influence the law’s implementation. Much of Dodd-Frank is still just far from implementation as it was a year ago when the controversial legislation was first passed.
As a result, we are left with uncertainty - uncertainty over how much of Dodd-Frank will withstand overt and covert attempts at repeal, and uncertainty over how the implementation of what is left of the new law will actually impact day-to-day life on Wall Street.
Is this uncertainty impacting the overall economic recovery in the US?
To the extent that investment capital remains undeployed because of such concerns, the US economy could continue to stutter and stall. Perhaps if the economic recovery had been stronger over the past year, Dodd-Frank would have quietly assumed its place in the regulatory firmament and Wall Street would have reluctantly grumbled its way into compliance with the new rules of the road.
However, a lingering recession and stubbornly high unemployment means that the battle over Dodd-Frank, and the future regulation of our financial markets, will continue to be fought, in the open and behind closed doors, for weeks and months to come.
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