Dodd–Frank: Time for Some Serious Pushback?

Abstract

Does the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 endanger the future of capitalism itself ? In this article, the author warns that the excessive regulatory authority granted under Dodd-Frank could be used to unduly restrict property rights and could sap the energy of American capitalism. The author reminds the reader that structured finance was designed to be the most rational form of finance and that for the most part securitization structures were not to blame for the financial crisis. The author also challenges the view that excessive greed and negligence within the structured finance and securitization industry were the primary drivers of the crisis. Rather, the author discusses the role of external factors, including the weakening of the dollar and the rise in energy prices, as well as the aggressive shorting of the credit markets, combined with an industry all too eager to make hand-wringing mea culpas, in the precipitation and response to the crisis. While the undesirable effects of Dodd-Frank can be ameliorated through regulatory action or inaction, ultimate relief may have to come from the repeal of offending provisions of the legislation. The author discusses some of the constitutional concerns with Dodd-Frank, but ultimately concludes that true freedom from the Act’s restrictions will require political action.

TOPICS: Legal and regulatory issues for structured finance, information providers/credit ratings