Nearing its fifth anniversary, the Dodd-Frank Wall Street Reform and Consumer Protection Act—for good or ill—continues to reshape the financial services regulatory landscape.
While the law’s two authors have since retired from Capitol Hill, they still keep a watchful eye on the financial reform law’s progress. Former Sen. Christopher Dodd, D-Conn., now heads the Motion Picture Association of America, while former Rep. Barney Frank, D-Mass., is writing books and doing the speakers circuit.
Sparked by the financial crisis of 2007 to 2010, the Dodd-Frank Act requires that regulators create 243 rules, conduct 67 studies and issue 22 periodic reports. Dodd-Frank was signed into law by President Barack Obama on July 21, 2010.
GOP lawmakers have vowed a full court press this year on introducing bills to roll back the financial reform law (despite the fact that Obama vows to veto them if they reach his desk).
Sen. Dodd spoke in late April with Investment Advisor in an exclusive interview about the financial reform law’s progress — including regulators’ progress in implementing the law’s many provisions as well as GOP efforts to curtail it — and where he sees the next financial crisis coming from, as well as a bit about his new life in the movie business.
The following is an edited version of that interview.
MW: With Dodd-Frank nearing its fifth anniversary, how do you feel about the law’s progress thus far and what are your hopes for its progress in shaping the financial services landscape in the coming years?
Sen. Dodd: It’s hard to pick up a newspaper and not read about the bill almost every day.
I think the bill is working pretty well. Maybe it won’t shock you to hear me say that as a co-author of it, but I think the financial infrastructure, the architecture of our financial system, is on far better footing then it was when the economic crisis hit, and that’s not a hard bar to get over given the condition of the architecture of financial services [during the economic crisis of 2007-2010].
‘Too-big-to-fail,’ I know that hasn’t been tested yet, but that was the amendment that [Sen.] Dick Shelby and I offered together that passed with over 90 votes as the very first amendment [to Dodd-Frank] on the floor of the Senate.
We increased transparency [with Dodd-Frank]; I think everyone in the derivatives market agrees that we know a lot more about what goes on in that very important market that has exploded in volume in just a few years.
[Dodd-Frank also] established an early warning system with the Financial Stability Oversight Council (FSOC). […] You almost wonder why this didn’t happen years ago and why it had to become a matter of law where actually these agencies [meet].
The bill requires that they meet four times a year; I think they met 32 times last year. They’re actually sitting down and looking over the horizon and they’re saying, are there things occurring, not just domestically or globally, either by product or institutions that pose risks that we ought to be conscious of?
Something that I’ve said all along in this thing is this bill does not stop the next crisis. It will happen. The question is can you minimize the impact of it because you identify it early enough and you start taking remedial steps to address it, instead of waiting until the system collapses as it did in the fall of 2008.
MW: Do you think there needs to be further measures beyond the Dodd-Frank Act?
Sen. Dodd: There may be in time. I didn’t write the Ten Commandments here. I wrote a bill, and I never met a perfect one in the 36 years that I sat in Congress. I don’t care if a bill is a page long; I promise you there are things that you didn’t get exactly right.
The role of oversight in Congress is [to assess if laws are] working the way that you intended them to. Are there unintended consequences? There’s nothing startling about that [oversight]—that’s not a retreat from what I think we did well. But I also recognize there will be new markets that will develop, new product lines that will emerge at some point, and it will be the role of my successors in Congress and regulators to take a look at all of that. What I think that I’ve provided here [in the Dodd-Frank law] is an architecture that allows for a lot of that to happen.
MW: For instance?
Sen. Dodd: That’s the way the Consumer Financial Protection Bureau is designed. […] To make sure that people are being treated fairly shouldn’t be considered a threat to people.