Recomendados
Recomendados
Mais conteúdo relacionado
Mais procurados
Mais procurados (20)
Semelhante a Dodd-Frank: What It Does and Why It's Flawed
Semelhante a Dodd-Frank: What It Does and Why It's Flawed (20)
Mais de Mercatus Center
Mais de Mercatus Center (20)
Último
Último (20)
Dodd-Frank: What It Does and Why It's Flawed
- 1. Dodd-‐Frank: What It Does and Why It’s Flawed Hester Peirce Mercatus Center at George Mason University Senior Research Fellow March 6, 2013
- 2. Our Agenda q Discuss Dodd-‐Frank’s objecMves q Discuss why those objecMves were not met by Dodd-‐Frank q IdenMfy areas of Dodd-‐Frank that could give rise to new problems
- 3. DISCLAIMERS • Given its breadth, there is no such thing as a Dodd-‐Frank expert. • The text and pictures on the slides are not intended to provide a comprehensive summary of Dodd-‐Frank. • Studies have shown that thinking about Dodd-‐ Frank can be harmful to your health.
- 4. Timing Problem January 2011 July 21, 2010 2:49 PM Signing the Wall Street Reform and Consumer Protec7on Act
- 5. Key Dodd-‐Frank ObjecMves q End taxpayer-‐funded bailouts q Make financial system more stable q End abusive pracMces that hurt consumers q Regulate in areas that have not been regulated a heavily as some believe they should be q Enable large financial enMMes to be wound down
- 6. Key Dodd-‐Frank Failings q Did not reform the housing finance system q Did not end taxpayer-‐funded bailouts q Encourages financial industry concentraMon q Harms consumers through higher prices and fewer opMons q Relies too heavily on regulaMon and undermines market discipline
- 7. Eliminated by Dodd-‐Frank Agencies and Offices Added by Dodd-‐Frank SEC Office of Office of Thri Bureau of Consumer SEC Investor Supervision Financial ProtecMon Ombudsman Advocate Financial Stability SEC Office of CFTC Office of Oversight Council Credit RaMngs Whistleblower SEC Office of Minority & Office of Financial Municipal Women Research SecuriMes Inclusion Off’s HUD Office of Federal Insurance SEC Office of Housing Office Whistleblower Counseling
- 8. Speed Walking through Dodd-‐Frank In walking through the Mtles, keep an eye out for • Confidence in regulators’ ability to idenMfy and solve problems • Wide discreMon and limited accountability for regulators • Diversion of regulatory focus from key issues • Costly new regulatory regimes
- 9. Title I What it Does Treas-‐ CFTC SEC Fed FDIC • Establishes the FSOC ury • Establishes the OFR Ins. OCC FHFA NCUA CFPB • Gives Fed power to impose Rep. enhanced prudenMal standards State State State OFR FIO Ins. Sec. Bank Why It’s Flawed Financial Stability Oversight Council • FSOC hasn’t been transparent, hasn’t coordinated, displaces regulators • DesignaMng specific firms as TBTF IdenMfy Make dulls market discipline SIFIs/ IdenMfy Regulat • Fed not fit to regulate nonbanks FMUs/ risks -‐ory AcM-‐ • OFR is not accountable rec’s viMes
- 10. Title II What It Does Fed & FDIC (or SEC or FIO) • Establishes an FDIC-‐run resoluMon make recommendaMon re alternaMve to bankruptcy a financial company or subsidiary Why It’s Flawed DeterminaMon by Secretary • Instead of reforming the bankruptcy model, abandons it Company is noMfied • Vague criteria for selecMng companies makes many companies potenMal resoluMon targets. Review by • Broad regulatory discreMon with only court: Limited limited judicial oversight in Mme and FDIC scope, • Possibility for certain creditors to be favored appointed confidenMal • Possibility for companies to be as receiver propped up Limited Appeal
- 11. Title III What It Does • Eliminates OTS Office of Thri • Raises deposit insurance to $250,000 Supervision • Expands assessment base for deposit insurance to total consolidated assets Federal-‐ State-‐ Savings and minus tangible equity chartered chartered Loan • Offices of Minority/Women Inclusion savings savings Holding associaMons associa-‐ Companies Mons Why It’s Flawed • Deposit insurance dulls market disc-‐ ipline, increases systemic instability • Adds a new layer of bureaucracy at Fed OCC FDIC each financial regulator
- 12. Title IV What It Does Hedge RegistraMon • Hedge fund/private fund SEC Fund registraMon Adviser • Raises threshold for adviser SEC SEC registraMon Private • Prevents investors from counMng Equity RegistraMon their home towards accredited Fund investor threshold Adviser DeregistraMon Why It’s Flawed Advisers • SEC resources diverted to watch out with RegistraMon for wealthy investors $25-‐100 States • New costs for private fund investors mill
- 13. Title V What It Does Department of Treasury • Creates Federal Insurance Office • Makes changes to surplus line Federal Insurance Office insurance and reinsurance regulaMon Why It’s Flawed • The FIO has largely unconstrained Monitor & Report ability to demand informaMon Recommend • FIO hasn’t released report SIFIs Consult and • DesignaMng insurance companies as & Advise Coordinate systemic aggravates TBTF problem and introduces an inexperienced Con-‐ regulator in the insurance space FSOC States gress
- 14. Title VI What It Does • Expands Fed’s regulatory authority Fed • Implements Volcker Rule FBO Why It’s Flawed Inter-‐ Bank / Secur-‐ • Too much power to the Fed Non-‐ Thri iMes media bank • Fed will be more invested in propping Holding Hold-‐ te SIFIs up a lot of financial enMMes Co ing Co Hold-‐ • Volcker Rule could make it difficult ing Co for banks to engage in legiMmate hedging and market-‐making Subsidiaries and Affiliates acMviMes, and market liquidity could suffer FuncMonal Regulators
- 15. Title VII What It Does Ex-‐ Swap • Assigns regulatory responsibility for change Dealer/ Swap Dealer OTC derivaMves market to CFTC/SEC / SEF MSP/Fin’l • Reshapes OTC derivaMves market by End User mandaMng reporMng, use of central clearinghouses, exchanges and regu-‐ laMng dealer-‐customer interacMons Non -‐fin’l FCM End Swap Data Why It’s Flawed User Repository • Fragments derivaMves regulaMon Pub-‐ SEC/ • Imposes inapt regulatory scheme lic CFTC • Harms end users • Clearinghouses are systemic risk Clearinghouse • ImplementaMon has been careless
- 16. Title VIII What It Does • FSOC designates systemically Financial Stability Oversight Council important FMUs & payment, clearing, sehlement acMviMes • Grants Fed, SEC & CFTC authority to prescribe risk-‐management standards for designated uMliMes and acMviMes • Allows for expansion of Fed discount and borrowing privileges Systemically Financial Why It’s Flawed important PCS Market UMliMes • New class of TBTF enMMes acMviMes • Expands government safety net • Grants broad regulatory power over firms engaged in designated acMviMes Fed SEC/CFTC
- 17. Title IX New Broker/ SRO/ New What It Does Investor Dealer PCAOB Muni • Creates new SEC bureaucracies Offices, Fiduciary Reforms Advisor • Grants SEC new enforcement powers TesMng & Duty Regime Studies • New corp gov/exec comp mandates Restrict New SEC Say-‐on-‐ Proxy • Removes credit raMngs from Mandat-‐ enforce-‐ Pay Access regulaMons, increases CRA regulaMon ory Arbi-‐ ment • Risk retenMon & other ABS regulaMon traMon powers Pay RaMo Comp. Claw-‐ SEC Why It’s Flawed Pay for Comm-‐ backs Funding Perform. ihees • Laundry list of changes, mostly unre-‐ Disclos. lated to crisis or financial companies Credit SecuriM-‐ SEC Whistle-‐ Re-‐ • Relevant reforms are poorly executed RaMng zaMon Organiz-‐ blow-‐ late • Hurts small & Main Street companies Agency Reform aMonal er to • Credit raMng agency reforms work at Reform Reform program Cris-‐ cross-‐purposes is
- 18. Title X What It Does Fed • Creates CFPB and gives it broad new Bureau of regulatory powers Consumer • Durbin amendment, which directs Financial the Fed to cap fees banks can charge ProtecMon merchants for debit card transacMons Senate Nominates Confirms Why It’s Flawed Pres-‐ • CFPB’s structure lacks accountability Con-‐ ident Director gress • Likely to result in limiMng consumer financial products and increasing Limited FSOC their prices Review • Durbin amendment imposes market-‐ Enforce-‐ distorMng price controls Rules Guid-‐ ment ance AcMons
- 19. Title XI What It Does Emergency Lending by Fed • Limits Fed’s emergency lending authority Fed • Requires congressional approval for FDIC emergency-‐guarantee Audit programs. GAO Report • Increases Fed transparency • Directs the GAO to audit the Fed’s Broad-‐Based Program financial-‐crisis assistance programs Solvent Good Treas-‐ Why It’s Flawed Compan-‐ collat-‐ ury Ap-‐ ies eral proval • Should be conMnuous GAO Fed audits • Transparency increases insufficient given Fed’s increased regulatory Congress authority under Dodd-‐Frank
- 20. Title XII What It Does • Authorizes Treasury to develop programs, including grants to banks, Treasury to improve low-‐/ moderate-‐income individuals’ access to credit • Allows for government –backed reserves for CDFI loans Insured depositories Why It’s Flawed CDFIs • Facilitates direct government State, local, tribal gov’t enMMes subsidizaMon of banking services and Joint ventures underpricing of credit Small Dollar Loans Consumers
- 21. Title XIII What It Does • Requires proceeds from sales of GSE obligaMons and securiMes and le-‐ over sMmulus funds to go to Treasury • Reduces size of TARP TARP • Requires FHFA to submit report to $700 Billion Congress on its plans with respect to housing finance Why It’s Flawed TARP • Masks Dodd-‐Frank’s true cost $475 • Didn’t fully end TARP Billion • Does lihle to address GSEs
- 22. Title XIV What It Does Ability to Pay Establishes Qualified Mortgage • Requires mortgages to be consistent Requirements for Mortgages Safe Harbor with borrowers’ ability to repay, understandable, and not unfair, Requirements/ decepMve, or abusive Rules for “High Cost” Mortgages RestricMons for Mortgage • Establishes “qualified mortgage” Originators • New mortgage-‐market requirements Mortgage Servicing Mortgage Appraisal • Emergency housing aid programs Requirements Requirements Why It’s Flawed • Fails to fix housing finance ProhibiMon of Certain Mortgage Taxpayer Assistance • Increases cost of mortgages Terms for Homeowners • One-‐size-‐fits-‐all mortgage market • Gives regulators power to pick HUD Office of Housing Counseling mortgage products for consumers
- 23. Title XV What It Does NEW SEC DISCLOSURE REQUIREMENTS • Requires new disclosures by resource Resource ExtracMon Issuers must extracMon companies disclose payments to foreign governments for commercial • Requires companies to publicly development of oil, natural gas, disclose their use of and procedures minerals relate to conflict minerals • Requires SEC disclosure of mine SEC reporMng companies for which safety violaMons conflict minerals are necessary to funcMonality or producMon must try to determine origin of minerals Why It’s Flawed & file conflict minerals report • Requires SEC to regulate beyond its experMse and distracts SEC SEC reporMng companies that own • Misuse of SEC disclosure mines must report mine safety • Costly, anMcompeMMve requirements violaMons
- 24. Title XVI Title XVI What It Does • Exempts parMcular derivaMves from secMon 1256 tax treatment TAX Why It’s Flawed • Could have meaningful revenue implicaMons for the United States, DERIVATIVES although the nature and magnitude of those implicaMons remains unclear REVENUES
- 25. What’s on the Agenda for 2013? • Many Dodd-‐Frank rulemakings underway • Changes to mortgage market as CFPB rules take effect and QRM rule is finalized • DesignaMons of SIFIs • ConMnued pressure for end user reform in derivaMves as margin and other rules for swaps go final • Final Volcker Rule
- 26. Challenges Facing Dodd-‐Frank Agencies • Sheer volume of rulemaking obligaMons • Balancing Dodd-‐Frank rulemaking with other rulemaking obligaMons and day-‐to-‐day operaMonal funcMons • Puqng regulaMons in place that comply with the statute, but are workable • Legal challenges based on ConsMtuMonal deficiencies, procedural flaws, economic analysis • Validity of CFPB Director Cordray’s recess appointment and consequent challenges to CFPB rules
- 27. What Should Keep An Eye On • ConcentraMon of financial system • Regulatory inundaMon and regulaMons serving as barriers to entry • Effect on investors, consumers, small enMMes • Broad regulatory discreMon, lihle accountability • Lihle economic analysis by economic regulators and no aggregate economic analysis • Early precedents by new agencies • Effect on economic growth
- 28. CFTC Dodd-‐Frank Rulemaking by Quarter 35 30 25 20 15 10 5 0 Source: Commodity Futures Trading Commission Final Rules Produced by: Robert Greene, Mercatus Center at George Mason University Proposed Rules Advanced NoMces of Proposed Rulemaking
- 29. Informal Rulemaking Also Must Be Taken Into Account Example: 73 CFTC Guidance Documents in 2012 9 8 7 Number of Guidance Documents 6 5 4 3 12 2 1 6 0 Source: Commodity Futures Trading Commission Produced by: Robert Greene, Mercatus Center at George Mason University