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The Dodd-Frank Act: Goals and Progress
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By Patrick Sims, psims@hamiltonps.com, 202-822-1205
In the midst of the complex and evolving debate surrounding “too-big-to-fail” (TBTF), the approach taken by the largest financial overhaul in U.S. history, Dodd-Frank, has been overlooked in the discussion. Whatever the merits of its approach to solving TBTF, it is worth revisiting what the law actually says and why the different pieces were written.
The goals of the Dodd-Frank Act are to:
- Reduce the likelihood of an individual firm’s failure.
- Lower a failure’s cost to the broader economy.
- Reduce the spread of financial contagion in the event of a future crisis.
While the effectiveness of these approaches are outside the scope of this paper, we detail the many rules designed to meet these three objectives including Orderly Liquidation Authority (OLA), Living Wills, the advent of the Financial Stability Oversight Council (FSOC), and many others. These efforts are far from complete, but as regulators work through Dodd-Frank, it does not make sense to discuss further regulatory efforts without the proper context of all that has …