When Congress passed the “Dodd-Frank Wall Street Reform and Consumer Protection Act” (H.R. 4173) in 2010, the purpose was “To promote the financial stability of the United States by improving accountability and transparency in the financial system, to end 'too big to fail', to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes."
Containing 848 pages of federal regulations primarily aimed at banks, the Dodd-Frank Act was supposed to protect us from a repeat of 2008. The federal agencies involved came up with 398 rules that after more than three years still have not been fully implemented. And, what's more, the rules are not all written yet, either.
As of September 2013, USA Today reported that just barely over 40% of the bill had been written and approximately two-thirds of the bill's deadlines had been missed.
Delays and Excuses
Why the slow roll-out on what was hyped as much-needed immediate action?
The well-funded opposition of the finance-industry lobby, plus legal battles and resistance in Congress. The 848-page bill is also a complex piece of legislation that attempts to mesh federal agencies that sometimes have conflicting views.
The slow progress of the passage of the Volcker Rule has also been blamed for the delays and failings of the Dodd-Frank bill.
The Volcker Rule
Prior to the passage of the Volcker Rule, banks were busy looking for loopholes...
Well, they found them.
Up to an estimated $10 billion in pre-tax annual bank profits that were supposed to be erased by the Volcker Rule were not.
Indeed, the Volcker Rule consists of 297,000 words. And they provide a plethora of loopholes and end runs for banks to use to get around obeying the original intent of the Volcker Rule. That's government efficiency for you.
One man's simple concept of safer banking was transformed by five government agencies into a 71-page exercise in complexity that requires an accompanying 892-page explanation.
Like Dodd-Frank as a whole, the Volcker Rule portion was supposed to crack down on Wall Street and it comes up short. Consumers are still at risk and bailing out banks that are 'too big to fail' is still on the table.
Banks remain vulnerable in key areas years after the crisis A key weakness that came to light following the crisis was that of the derivatives market. A recent report from watchdogs from 10 countries, including the U.S., raised serious concerns about big banks and regulators still being unable to deal with any problems that may arise in the derivatives market.
Furthermore, Reuters reports that the Wall Street traders may be manipulating a key derivatives market and front running Fannie Mae and Freddie Mac, hurting the US-owned mortgage giants in the process.
Even Alan Greenspan has said that that, despite the way in which Dodd-Frank tightens regulation, he does not believe it can prevent asset-price bubbles. And Alan Greenspan knows a thing or two about bubbles.
“The only way that I can see out of it is to find a way that the financial system does not default in a serial manner,” he recently old Bloomberg. “And the only way that you can guarantee that is, in fact, to reduce the amount of debt.”
Since Congress just passed a $1.1 trillion bi-partisan spending bill that increases overall spending, it's doubtful debt reduction will be on the menu anytime soon.
With all of the pages and words and rules already in place that simply are not working, is there a point to passing more of them? Remember, Dodd-Frank still has more than 200 rules to write and implement.
Practical and frugal, finance and consumer issues are a natural fit for Daniella Nicole. Her university education was in personal finance, consumer issues and housing. She has worked as a financial counselor and mortgage loan officer, taught workshops and university classes on a variety of financial topics, developed financial education segments for an online university course, and passed both AFCPE and CA Real Estate exams. Her favorite money motto is: "Use it up; wear it out. Make it do or do without."