There are two ways to judge the Dodd-Frank financial reform bill that will be signed into law. One way is through a solely political prism. From that standpoint any bill passed is a stunning success. The Obama Administration can now put another accomplishment notch on the handle of its six-gun.
Another way is from a purely pragmatic point of view. Had the measures in Dodd-Frank been in place in 2007 would it have prevented the financial crisis? Since the crisis seems to have been caused by borrowers taking on excessive debt, lenders taking on excessive risk, and the failure of any of a handful of financial institutions posing unacceptable risk to the entire financial system, the answer would appear to be no. Dodd-Frank does little if anything about any of these matters.
I’ve been trying very hard to find a positive review of Dodds-Frank from a pragmatic basis and I’ve finally found one. Mish Shedlock writes:
Medical reform not only accomplished nothing, it actually made matters substantially worse.
In sharp contrast to medical reform, I cannot come up with any financial reform provisions that make matters substantially worse.
Given the absolute best we could ever expect out of a major piece of legislation supported and promoted by Obama is nothing, and given that nothing was accomplished with no major detriments making matters much worse, the financial reform bill must be considered a stunning success.
Indeed, we should all be thrilled by it.
I’m an agnostic on the bill. To my untutored eye the bill appears to put even more emphasis on regulators doing something (unspecified) to prevent a future crisis. I’ve seen the bill characterized as the Full Employment for Financial Regulators Bill. As such it would appear to kick the can on financial reform down the road.
Since that’s essentially what healthcare reform did, at least on cost control, I think we can see a pattern emerging.