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From Securities Regulation Daily, July 21, 2015

Dodd-Frank Act, five years later, receives mixed reviews

By Jacquelyn Lumb

The Dodd-Frank Act, which was signed into law five years ago today in response to the worst financial crisis since the Great Depression, has received mixed reviews from government and industry. The SEC, tasked with a substantial number of rulemakings and reports under the Act, continues its work to implement the rules. Chair Mary Jo White noted last week that the SEC has furthered the goals of the Act through the implementation of the statute and through its own initiatives. Through the staff’s efforts, she said the SEC is building a lasting regulatory regime for a robust financial system that supports the broader U.S. economy.

White House says work continues. Charlie Anderson, a senior advisor for the National Economic Council, wrote in a White House blog about “the law that’s been quietly protecting you and strengthening our economy for the past five years.” He wrote that President Obama continues to work to protect American consumers; keep the markets safe, open and fair; and provide a foundation for strong economic growth. The Administration is finishing the financial reform work that the Act started and has pledged to fight any efforts to roll it back. While opponents of reform said the Act would hurt lending and kill jobs, Anderson noted that it didn’t. He wrote that business lending by banks is up 30 percent and unemployment is the lowest it has been in seven years. The U.S. also has experienced the longest streak of private-sector job growth on record, with nearly 13 million jobs created, according to the blog.

Brown warns against rollback. A number of U.S. senators weighed in on the five-year anniversary. Senator Sherrod Brown (D-Ohio) said that thanks to the Dodd-Frank Act, today’s economy is stronger and the U.S. financial system is safe and more stable. He warned against allowing special interests to undermine the reform efforts and returning to the days of abusive lending and reckless Wall Street gambling that nearly took down the economy.

Stabenow calls for more CFTC resources. Senator Debbie Stabenow (D-Mich), the ranking member on the Agriculture Committee, noted that significant strides that have been made since the U.S. economy was brought to the brink of collapse by risky financial practices. She also warned against underfunding the CFTC, which leaves the economy vulnerable, and said she will fight for increased resources to foster open, transparent, and competitive derivatives markets.

Shelby criticizes Act’s results. Senate Banking Committee Chair Richard Shelby (R-Ala), on the other hand, said the Act, rather than ending too-big-to-fail financial institutions, actually encouraged the biggest banks to become bigger and more concentrated. In remarks today to the Heritage Foundation, he said the Act has fallen far short of its goal of reducing risk in the system. Too-big-to-fail is far from dead, in his opinion, but there are meaningful steps that could be taken to ensure a safer financial system and reduce the likelihood of taxpayer bailouts in the future. He said the Financial Regulatory Improvement Act would incentivize financial institutions to reduce risk by providing a way for them to remove themselves from the systemically important designation under the Act.

Conoway urges G-20 action. Rep. K. Michael Conaway (R-Tex), chair of the House Agriculture Committee, issued a statement in which he said that, despite 50 rulemakings by the CFTC, the reforms of Title VII of the Act have not lived up to their promise. He said the failure to coordinate derivatives reforms both at home and abroad has fragmented the regulatory regimes the G-20 leaders promised to enact. Title VII has created confusion in the market, in his view, and disrupted global liquidity markets. Conaway said his committee will meet next week to examine what is preventing global regulators from meeting the G-20’s commitments on derivatives market reforms.

ISDA sees progress and challenges. The International Swaps and Derivatives Association (ISDA) also issued a statement in which it said one matter on which everyone should agree is that the derivatives markets have made substantial progress in achieving the goals set out by policymakers. Most of the Title VII requirements have been implemented, which has resulted in clearing mandates, trade execution requirements, and reporting and transparency obligations.

While much progress has been made, ISDA also noted the challenges that remain. ISDA said it is time to focus on ensuring that regulatory regimes are consistent and harmonized across borders, and ensuring that they support risk management that enables economic activity and growth. In ISDA’s view, many of the challenges stem from a lack of coordination and cooperation among global legislators and regulators. ISDA outlined a number of targeted amendments which it believes will resolve some of the remaining challenges, starting with harmonizing the rules as much as possible.

MainStory: TopStory DoddFrankAct Derivatives

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