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Video of this event will be livestreamed online athttp://www.american.com/archive/2010/october/what-have-they-done-implications-of-the-dodd-frank-act.
All 2,300 pages of the Dodd-Frank Act are now law, representing a vast regulatory expansion. A measure creating as much government intervention as this act does will be debated
Download Audio as MP3 for years, perhaps even generations. Was this legislation necessary? Will its effects, overall and with respect to specific provisions, be good or bad for the financial system and the economy? How will it change the activities of financial institutions and regulators, and the functions of financial markets? Will it prevent another financial crisis or real estate bubble? Will it reduce "systemic risk," and how will it affect risk taking in general? How will it affect consumers of financial services and the small businesses that will now be subject to regulation? What, if anything, should the administration and Congress have done differently, and what should they do next? These and related questions will be addressed by two panels of experts with widely different perspectives.
|1:00||What Is Good or Bad about the Dodd-Frank Act? Part I|
|Panelists:||Martin Baily, Brookings Institution|
|Steve Bartlett, Financial Services Roundtable|
|Daniel Crowley, K&L Gates|
|Alex J. Pollock, AEI
|Vincent R. Reinhart, AEI
|Moderator:||Peter J. Wallison, AEI|
||What Is Good or Bad about the Dodd-Frank Act? Part II|
||Wayne Abernathy, American Bankers Association|
|Adam Levitin, Georgetown University Law Center
|Ed Pinto, AEI|
|Peter J. Wallison, AEI
|Todd J. Zywicki, George Mason University School of Law
|Moderator:||Alex J. Pollock, AEI
WASHINGTON, DC, OCTOBER 14, 2010--Thursday at AEI, two panels debated the merits and shortcomings of the new Dodd-Frank Act. In the first panel, Steve Bartlett of the Financial Services Roundtable saluted the concept of the Consumer Financial Protection Bureau (CFPB) but stated that placing price controls on debit cards is a huge mistake. Martin Baily of the Brookings Institution agreed with Congress's decision to leave the fate of government-sponsored enterprises out of the act and said that the new committees tasked with systemic-risk management (the Financial Stability Oversight Council) and consumer protection are a good idea. But AEI's Vincent R. Reinhart pointed to evidence from previous financial crises that new regulations simply stunt economic growth in the decade following a crisis. Reinhart said the Dodd-Frank Act will do little to prevent "too big to fail" institutions from arising and added that its regulatory complexity will weigh down our economic recovery. Next, Daniel Crowley of K&L Gates stated that the world is undergoing a paradigm shift from free-market capitalism to state-managed capitalism. Crowley said capital markets have now been politicized; whether companies like it or not, the government will be industry's partner for the foreseeable future. Finally, AEI's Alex J. Pollock said his biggest concern about Dodd-Frank is its assumption that a regulatory agency can anticipate the future better than others, despite the lack of evidence that this is true.
In the second panel, Wayne Abernathy of the American Bankers Association alleged that the CFPB was founded on a faulty premise--that an agency and consumer "advocates" can know the needs of consumers better than the consumers themselves. George Mason University's Todd Zywicki agreed with Abernathy. He was troubled that the CFPB is an independent entity whose director effectively answers to no one. He was also concerned that the CFPB, in its attempts to "protect" consumers, will increase the consumer's costs to the point that they cannot afford the products in the first place. Adam Levitin of Georgetown University took a different view, claiming that the CFPB consolidates existing consumer-protection powers under one roof, which should aid transparency and effectiveness. Next, AEI's Ed Pinto presented his view that federal housing policy was the primary cause of the financial crisis--a view Dodd-Frank ignores completely. Pinto stressed that the act reinforces the nationalization of the housing-finance system, which will lead to bigger troubles down the road. Finally, AEI's Peter J. Wallison agreed with both Abernathy and Zywicki regarding the CFPB, fearing the consequences of having an agency that is completely outside of any real regulatory control. Wallison also agreed with Pinto that the root of the financial crisis was federal housing policy.
- "In the free-market capitalism paradigm, the goal is the creation of personal wealth. In the new paradigm of state-managed capitalism, the goal is to control the wealth that markets create."
--Daniel Crowley, Partner, K&L Gates LLP
- "[The Financial Stability Oversight Council] is a political body, not an intellectual body. It's unlikely they can achieve intellectual tasks. The identification of emerging systemic risk is an intellectual task, not a political task, so I doubt its success in that [task]."
--Alex Pollock, Resident Fellow, AEI
- "Regulation is a qualitative issue, not a quantitative issue. And that means that whether a regulation that gets passed by the Consumer Financial Protection Bureau is a good thing or a bad thing needs to be analyzed on a one-off basis."
--Adam Levitin, Associate Professor of Law, Georgetown University Law Center
- "If you were to get out a textbook of how to create a dysfunctional agency designed to capture and implement every single pathology of a Washington bureaucracy that has been studied and identified over the past twenty years, you would design the Consumer Financial Protection Bureau."
--Todd Zywicki, Counsel, Mayer Brown
Wayne A. Abernathy joined the American Bankers Association in February 2005 in the newly created position of executive director for financial-institutions policy and regulatory affairs. He oversees groups that deal with policy development, regulatory issues, bank general counsels, economics, and tax and accounting. Before joining the association, Mr. Abernathy spent two years as assistant secretary for financial institutions at the Treasury Department under President George W. Bush. He received the Alexander Hamilton Award in recognition of his service. He also served on the Senate Banking Committee from 1981 to 2003 in various capacities, including staff director under Chairman Phil Gramm (R-Tex.), staff director of the Subcommittee on Securities, Republican economist, and economist for the Subcommittee on International Finance and Monetary Policy. He worked as a senior legislative assistant for Senator Gramm from 1987 to 1989.
Martin Baily is a senior fellow in economic studies at the Brookings Institution. From 1999 to 2001, he was the chairman of the Council of Economic Advisers during the Clinton administration, and he was one of three members of the council from 1994 to 1996. His research focuses on financial-sector reform, productivity and competitiveness, and U.S. economic policy.
Steve Bartlett is the president of the Financial Services Roundtable, an organization of one hundred of the largest integrated financial services companies that provide banking, insurance, and investment products and services to the American public. Roundtable member companies directly account for $65.8 trillion in managed assets, $1 trillion in revenue, and 2.4 million jobs. Under Mr. Bartlett's leadership, the roundtable has helped shape public policy impacting member companies, their employees, and customers. He propelled the roundtable to "major player" status on Capitol Hill and among regulatory agencies. Before joining the roundtable in 1999, Mr. Bartlett was mayor of Dallas from 1991 to 1995 and a member of the House of Representatives from 1983 to 1991. While in Congress, Mr. Bartlett served on the House Banking Committee and was a leader in financial modernization. He was also a deputy whip in the House Republican leadership with then-representatives Trent Lott (R-Miss.), Dick Cheney (R-Wyo.), and Newt Gingrich (R-Ga.).
Daniel Crowley is a partner at K&L Gates LLP in the firm's Washington, D.C., office. His practice is focused on public policy issues relating to financial services and capital markets. He leads the firm's Capital Markets Reform Group, which facilitates coordination across these practice areas on behalf of the firm's policy clients. Before joining K&L Gates, Mr. Crowley was chief government-affairs officer for five years at the Investment Company Institute, the national association of the mutual-fund industry. Mr. Crowley was also vice president and managing director of the Office of Government Relations of the Nasdaq Stock Market Inc. He joined Nasdaq after managing government relations during the spinoff of Nasdaq from its former parent, the National Association of Securities Dealers Inc. Mr. Crowley served for eight years in the House of Representatives in increasingly senior staff positions, including general counsel for the Office of the Speaker, general counsel for the Committee on House Oversight, and minority counsel for the Committee on House Administration.
Adam Levitin is an associate professor of law at Georgetown University Law Center and the Robert Zinman Resident Scholar at the American Bankruptcy Institute. He is also special counsel for mortgage affairs for the Congressional Oversight Panel. Before joining the Georgetown faculty, Mr. Levitin practiced in the business-finance and restructuring department of Weil, Gotshal & Manges LLP in New York and served as law clerk to the Honorable Jane Richards Roth on the U.S. Court of Appeals for the Third Circuit. Mr. Levitin's research focuses on financial institutions and their role in the consumer and business credit economy, including consumer finance, structured finance, identity theft, and business-bankruptcy reorganization.
Edward Pinto recently joined AEI as a resident fellow. He has provided credit and marketing consulting services to the mortgage-finance industry for the last twenty years. Mr. Pinto was the executive vice president and chief credit officer at Fannie Mae from 1987 to 1989 and the senior vice president of marketing and product management from 1985 to 1987. Before his work at Fannie Mae, Mr. Pinto was senior legal counsel for the Mortgage Guaranty Insurance Corporation and general counsel for the Michigan State Housing Development Authority. Mr. Pinto's consulting clients have included GE Capital Mortgage Insurance Company, Dime Savings Bank, Mellon Bank, and Home Savings Bank. Mr. Pinto worked with the Loan Performance Corporation to develop their delinquency database, which is now the industry standard. He has appeared as an expert witness in real estate finance–related litigation and has published or contributed to articles in various publications and on the op-ed page of the Wall Street Journal. Mr. Pinto is frequently interviewed by newspapers and other news sources on real estate finance.
Alex J. Pollock has been a resident fellow at AEI since 2004, focusing on financial policy issues, including housing finance, government-sponsored enterprises, retirement finance, corporate governance, accounting standards, and the banking system. Previously, he spent thirty-five years in banking, including twelve years as president and CEO of the Federal Home Loan Bank of Chicago. He is the author of numerous articles on financial systems and the organizer of the "Deflating Bubble" series of AEI conferences. In 2007, he developed a one-page mortgage form to help borrowers understand their mortgage obligations. He is a director of Allied Capital Corporation, the Chicago Mercantile Exchange, the Great Lakes Higher Education Corporation, and the International Housing Union for Housing Finance, and the chairman of the board of the Great Books Foundation.
Vincent Reinhart is a resident scholar at AEI. He is a former director of the Federal Reserve Board's Division of Monetary Affairs, and has spent more than two decades working on domestic and international aspects of U.S. monetary policy. He has held a number of senior positions in the Division of Monetary Affairs and the Division of International Finance and served for the last six years of his Federal Reserve career as secretary and economist of the Federal Open Market Committee. Mr. Reinhart worked on topics as varied as economic bubbles and the conduct of monetary policy, auctions of U.S. Treasury securities, alternative strategies for monetary policy, and the efficient communication of monetary policy decisions.
Peter J. Wallison holds the Arthur F. Burns Chair in Financial Policy Studies at AEI, where he codirects the Institute's program on financial-market studies. He is also a cochair of the Pew Financial Reform Task Force and a member of the congressionally authorized Financial Crisis Inquiry Commission. Mr. Wallison previously practiced banking, corporate, and financial law at Gibson, Dunn & Crutcher LLP in New York and Washington, D.C. During 1986 and 1987, Mr. Wallison was White House counsel to President Ronald Reagan. From 1981 to 1985, Mr. Wallison was general counsel of the Treasury Department, where he played a significant role in the development of the Reagan administration's proposals for deregulation in the financial services industry. He also served as general counsel to the Depository Institutions Deregulation Committee and participated in the Treasury Department's efforts to deal with the debt held by less-developed countries. Between 1972 and 1976, Mr. Wallison was special assistant to New York governor Nelson A. Rockefeller and, subsequently, counsel to Mr. Rockefeller when he was vice president of the United States.
Todd J. Zywicki is a professor of law at the George Mason University School of Law and senior fellow of the James Buchanan Center's Program on Politics, Philosophy, and Economics. From 2003 to 2004, Mr. Zywicki was the director of the Office of Policy Planning at the Federal Trade Commission. He has lectured and consulted with government officials around the world, including those from Italy, Japan, and Guatemala. Mr. Zywicki was recently named a member of the United States Department of Justice's study group on identifying fraud, abuse, and errors in the U.S. bankruptcy system. Mr. Zywicki is the author of more than fifty articles in leading law reviews and peer-reviewed economics journals. He is a contributor to the popular legal weblog "The Volokh Conspiracy" and is currently the chair of the Academic Advisory Council for the Bill of Rights Institute, the film We the People in IMAX, and the McCormick-Tribune Foundation's Freedom Museum in Chicago.