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On Thursday afternoon, Cliff Asness of AQR Capital Management and AEI President Arthur Brooks hosted a wide-ranging, informative, and frequently humorous discussion of the current state of American finance, the effects of the Dodd-Frank Act, and the increasing impact of cronyism in public life.
Asness argued that the Dodd-Frank Act is not based on a comprehensive plan for revamping regulation; rather, it is a "left-leaning wish list" of ideas that were combined somewhat haphazardly into a single bill. Asness predicted that a fully implemented Dodd Frank would mean higher costs for households, decreased access to consumer credit, and increasingly damaging future financial crises brought on by a false perception of security under the act's reforms. Additionally, said Asness, many of the institutions created by Dodd-Frank are designed to be "permanent and unassailable" by elected leaders, rendering reform difficult.
After providing a definition of cronyism, Asness offered an explanation for the growth of cronyism today, which is rooted in the increasing size and scope of government. Only by limiting government's growth can we limit opportunities for cronyism, Asness argued.
Brooks and Asness collectively highlighted the need to better explain the benefits of free markets and capitalism.
In May 2010, financier Cliff Asness said in The Wall Street Journal that the Dodd-Frank Act was “perfectly designed to create the largest and most powerful crony system in history. It's not that the people, regulator or regulated, are personally corrupt. It's that the system will itself select for, reward and enforce corruption.”
Was this prediction overblown, or far too prescient? Are new financial regulations encouraging responsible behavior, or are firms simply cozying up to Washington? And how should a principled, free-market financier interact with decision makers in Washington?
At this event, Arthur Brooks and Cliff Asness will discuss the consequences of Dodd-Frank and the state of competition in America's financial markets.
If you are unable to attend, we welcome you to watch the event live on this page. Full video will be posted within 24 hours.
Cliff Asness, AQR Capital Management
Arthur C. Brooks, AEI
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Cliff Asness is the managing and founding principal of AQR Capital Management. Before cofounding AQR, he was a managing director and director of quantitative research for the asset management division at Goldman Sachs. Asness is on the editorial boards of the Financial Analysts Journal and the Journal of Portfolio Management, for which he has authored articles on many financial topics; these articles have won several awards, including the best paper award from the Journal of Portfolio Management (2001; 2003), the Graham and Dodd Readers' Choice Award (2005), and the Best Perspectives Award (2004) from the Financial Analysts Journal. The CFA Institute awarded him the James R. Vertin Award for producing a body of research notable for its relevance and enduring value to investment professionals. Asness is on the governing board of the Courant Institute of Mathematical Finance at New York University and the board of the International Rescue Committee. He is also a trustee of AEI, the Manhattan Institute, and the Atlas Society.
Arthur C. Brooks has been the president of AEI since January 1, 2009. Previously, he was the Louis A. Bantle Professor of Business and Government Policy at Syracuse University. He is the author of 10 books and hundreds of articles on topics ranging from the economics of the arts to military operations research. His most recent book is the New York Times bestseller “The Road to Freedom: How to Win the Fight for Free Enterprise” (Basic Books, 2012). Other books include “The Battle” (Basic Books, May 2010), “Gross National Happiness” (Basic Books, 2008), “Social Entrepreneurship” (Prentice-Hall, 2008) and Who Really Cares (Basic Books, 2006). Before pursuing his work in public policy, Brooks spent 12 years as a professional French hornist with the City Orchestra of Barcelona and other ensembles.