July 9, 2020

Nearly three years after Dodd-Frank, reforms happen slowly

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182002912From WCAI

On July 21, 2010, President Obama signed into law the Wall Street Reform and Consumer Protection Act, commonly known as the Dodd-Frank bill. Reporter Gary Rivlin says “the passage of Dodd-Frank was something of a miracle.” But to the chief lobbyist for the Financial Services Roundtable, a lobbying group that represents 100 of the country’s largest financial institutions, it was just “halftime.”

Rivlin is an investigative reporting fellow at The Nation Institute. In his article “How Wall Street Defanged Dodd-Frank,” he tells the story of what he calls the fight that has taken place “in the back rooms of the bureaucracy.” He tells Fresh Air’s Dave Davies, “You’ve got regulatory lawyers and lobbyists doing hand-to-hand combat over every comma, every clause in the rule-making process. And then finally if a rule makes it, if in fact it’s put into law, then you’ve got the legal challenge.” Rivlin reports that the financial industry has spent more than $1 billion on hundreds of lobbyists who have been working to chip away at Dodd-Frank in the three years since its passage.

“It’s a long and arduous process that just adds months and months,” Rivlin says, “and so even though we’re nearly three years out from Dodd-Frank, of those 398 rules requiring action by a regulator, only about 148 of them … have been finalized, in large part because we’ve created a process in Washington that has openness and fairness. But if you have mighty forces that have these battalions, they’re able to really choke the process and slow it down.”

So, as Davies asks Rivlin, “Is the financial system any less vulnerable to a crash than it was in 2008?”

Rivlin’s answer is “No.”

Part of the radio Transcript as it relates to the Cayman Islands

DAVIES: So where are we on derivatives reform? I mean, I’ve read that some of the big banks are now having to register as derivatives traders. I mean, some things happened, right? Is there any substantial reform in this area that’s effective?

RIVLIN: Well, there’s plenty of progress. I mean, Gensler’s agency has implemented 40 of the 60 rules that they were told to create. So there’s been huge steps. As you say, the big banks are registering to sell derivatives. They’re starting to share the pricing. But until they finish writing the rules, there’s no market. There’s no equivalent of a stock market to trade them on.

And so there’s something of an all-or-nothing element to this, and they’re well on their way, but the big worry that consumer advocates have, those who believe in derivatives reform have, is that there’s the potential still for these huge loopholes to be written into Dodd-Frank. Just to choose one huge one, cross-border regulation. You know, what do you do with the foreign subsidiaries of a U.S.-based bank.

So if Citigroup is selling derivatives out of its New York office, obviously that would fall under Dodd-Frank. Well, what if they’re selling – what if they transfer it to Tokyo or London? Well, you know, the Japanese are doing derivatives reform. The EU, the European Union, is well on its way towards derivative reform.

What if they sell it out of the Cayman Islands, which is exactly what the Citigroup is doing in 2008, part of their derivatives book was being sold out of the Cayman Islands? There won’t be regulation there. That’s the whole idea of going to the Cayman Islands. So what Gary Gensler says is we have to regulate those derivatives.

For much more on this story and to listen and/or read the whole transcript go to:

http://capeandislands.org/post/nearly-three-years-after-dodd-frank-reforms-happen-slowly

 

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