Does the Dodd-Frank Wall Street Reform and Consumer Protection Act need an overhaul -- or just a few good tweaks to make it more effective?
That's the key question to be considered by a task force of the Bipartisan Policy Center, a nonprofit Washington, D.C.-based think tank that promotes bipartisanship in political dialogue and policy-making.
The effort, outlined in a recent white paper, "The Bipartisan Policy Center's Financial Regulatory Reform Initiative," aims to evaluate the financial regulatory system and propose changes to improve financial regulation and supervision while preserving Dodd-Frank's intentions to prevent systemic risks and help consumers.
Rather than apply a strict cost-benefit analysis, the initiative plans to weigh regulatory policies and outcomes in terms of how well they promote economic stability yet avoid serious adverse consequences for economic growth.
"Striking the appropriate balance -- while recognizing that this balance will evolve over time with financial and technological innovation and growth -- should be the objective of policy makers in determining regulatory policy," the paper stated.
According to the paper, the initiative will "assess what is working well and what is not working so well," elaborate on specific areas that still aren't clear and propose both "fine-tuning" and more substantial reforms to address gaps in the law. International implications will be considered as well as domestic outcomes.
The initiative's five key areas of interest will be systemic risk to the financial system, resolution of so-called too-big-to-fail banking companies, capital markets and derivatives trading, consumer financial protection and the structure of regulatory agencies. Five white papers are to be written and released in 2013.
In their conclusion, the paper's authors noted the tension between Dodd-Frank supporters, who fear that reopening the legislation could undermine its achievements and sacrifice progress already made toward a more stable financial sector, and financial industry companies, who believe the current political climate is hostile to their interests and further discussion of Dodd-Frank will force them to shrink their operations or move activities overseas.
"Regardless of who wins the November elections for president and for Congress," the paper concluded, "policymakers will have to continue to deal with financial regulation."
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