Dodd-Frank is the largest overhaul of the financial regulatory system since the Great Depression. It is 2,319-pages long, compared to Glass-Steagall (47 pages), Gramm-Leach-Bliley (145 pages), and Sarbanes-Oxley (66 pages). It will take financial institutions more than 58 million hours to file all the necessary paperwork — the equivalent of 29,000 full time employees working year round on compliance. It creates multiple new regulatory bodies in Washington costing taxpayers millions of dollars each year.
Dodd-Frank’s effects on the economy, industry, and consumers are far-reaching. AEI scholars Peter Wallison, Phil Swagel, Charlie Calomiris, and Alex Pollock, have been following implementation closely. Here is a collection of their work and other selected pieces on the topic.
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Outside of executive salaries at the largest institutions, perhaps the highest-paying and most-secure jobs in banking can be found at the federal bank regulatory agencies, where average employee compensation is more than 2.7 times that of private-sector bank employees.
It is true that the very top bank executives make more in a year than most of us make in a lifetime, but compensation of this magnitude is rare. Most banks in this country are small businesses and pay employees modest salaries. Yet one group in banking stands out as highly paid—federal bank regulators.
Since the financial crisis in 2008, central bankers and bank regulators world-wide have repeatedly called for controls on "shadow banking." But if bank regulators get their way, much of the U.S. financial system will lose its capacity for risk-taking as well as its dynamism, innovativeness and flexibility. And the U.S. economy would not be any safer.
In September 2013, the Financial Stability Oversight Council (FSOC) designated Prudential Financial as a systemically important financial institution (SIFI); its rationale was perfunctory and data-free, suggesting that the FSOC sees no need to justify its designation decisions. Congress must step in, and quickly, before this pattern continues.
For those who wanted to greatly expand the power of government over banks and nonbank financial institutions and markets, we got the Dodd-Frank Act of 2010.
The Consumer Financial Protection Bureau’s (CFPB’s) new rules for mortgage lending practices will not deter predatory lending and will significantly increase many small banks costs of mortgage lending.
The financial reforms enacted in the DFA have given government regulators many new powers, including the ability to use the banking system to implement politically driven lending policies. These new rules, many well-intentioned, have created a number of negative unintended consequences.
Government-directed lending policies create an unfavorable financial environment that pushes resources out of the financial sector, reducing business and consumer access to credit and limiting economic growth.