Dodd-Frank isn’t close to implemented

June 6, 2013

One of the reasons the impending D.C. Circuit confirmation battles are so important is that the court has played, and will continue to play, a big role in Dodd-Frank implementation. The court has jurisdiction over a wide variety of regulatory agency decisions, and as Haley Sweetland Edwards at the Washington Monthly has explained, it's already used that power to weaken trading restrictions that Dodd-Frank authorized.

That, and other hurdles that regulators have had to jump through, have added up to a bill that's far behind where it should be implementation-wise. Taegan Goddard points to a remarkable series of charts by Frank Pompa and Denny Gainer at USA Today illustrating just how far behind Dodd-Frank is. Only 153 (38.4 percent) of the 398 required rules in the bill have been finalized. That's despite the fact that 70.1 percent were supposed to be finalized by this past Monday:

What happened to the other 245 rules? Well, 117 have been proposed but not finalized. But 128 haven't even been proposed yet. More concerning still, regulations around banking, asset-backed securities, and "liquidation authority" — perhaps the regulations most directly related to the causes of the 2007-08 crisis and bailout — are particularly slow in being implemented:

So who's to blame here? Edwards and Gary Rivlin of The Nation argue that persistent industry lobbying has slowed down rule-making and, where rules were produced, made them more industry-friendly. Others are more optimistic. Sheila Bair, the former FDIC chair who clashed frequently with the Obama administration on banking issues, told Mike Konczal that she thinks the bill has largely ended the "too big to fail" problem.

And even if it's implemented fully, some might argue that it doesn't go far enough. Konczal, for example, argues that higher capital requirements on banks are necessary. Ironically, slow or weakened Dodd-Frank implementation could boost the chances of such additional measures. As Ezra wrote earlier this year, "If the financial sector is too effective at evading meaningful reforms, then it’s probably only a matter of time before some too-big-to-fail institution self-detonates, putting the entire economy at risk. That’s when the bank-breakers will have their moment. They’re the only group in town with a persuasive answer if current reforms allow a too-big-to-fail bank to once again threaten the economy."

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Neil Irwin · June 6, 2013