Closing in on the one-year anniversary of President Obama signing the Wall Street Reform and Consumer Protection Act (Dodd-Frank) into law, Bloomberg News highlights the positive impact the new law has had on the American financial system. In the editorial “Banks Run Amok Is Less Likely a Year after Dodd-Frank,” the finance publication explains that Dodd-Frank has already accomplished a great deal to improve the nation’s financial security:
Dodd-Frank isn’t perfect, but already its influence on the financial system has been positive, in ways big and small. Accounting is more transparent; off-balance-sheet assets are largely a thing of the past … As Bloomberg News has reported, banks are even hiring consumer advocates to make sure their policies on overdraft fees and credit cards will pass muster, now that the new Consumer Financial Protection Bureau is about to send out examiners.
The article goes on to discuss the importance of fully funding the agencies Dodd-Frank charged with policing the financial markets:
Regulators are being tougher, too…Without adequate financing, regulators won’t be able to hire the best and brightest or acquire the technologies necessary to police the markets.
The article concludes that, while more work remains to ensure adequate protections exist, Dodd-Frank has gone a long way to empower regulators to prevent another collapse of the American financial system:
Rules forcing most derivatives trades to be processed through clearinghouses, and backed by collateral, should also be accepted globally to avoid regulatory arbitrage, in which trading firms move to countries with the least intrusive, and lowest cost, oversight. Regulators need authority to peer inside the records of financial firms based in other countries, and not just the books of their U.S. branches…
… Thomas M. Hoenig, the Kansas City Federal Reserve president, has said that the incentives for risk-taking that existed before the crisis all remain in place. The difference is that, this time, regulators are on the case -- unless the Dodd-Frank naysayers get their way.