The Senate's Financial Regulatory Reform Bill: Fannie & Freddie Remain MIA

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The Senate's financial regulatory reform bill was passed by the Senate on Thursday evening.  The devil will surely be in the details -- both with respect to how the reconciliation with the House of Representatives' similar bill (H.R. 4173) is worked out and then how the implementing regulations are developed by the Fed, the SEC, the FDIC, etc.

But there are 2 elephants in the room about whom there will be no details worked out: Fannie Mae and Freddie Mac.  Both bills are completely silent with respect to any reform of these two dominant entities in the residential mortgage secondary markets.  How anyone on Capitol Hill can claim that these bills represent "fundamental reform", when these 2 mortgage giants -- who will probably represent the largest net cost from the federal government's "bailouts" of the financial sector -- remain unaddressed, remains a deep mystery.

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The Dodd-Frank Act, signed into law in July 2010, represented the most significant and controversial overhaul of the U.S. financial regulatory system since the Great Depression. Forty NYU Stern faculty, including editors Viral V. Acharya, Thomas F. Cooley, Matthew P. Richardson, and Ingo Walter, provide a definitive analysis of the Act, expose key flaws and propose solutions to inform the rules’ adoption by regulators, in a new book, Regulating Wall Street: The Dodd-Frank Act and the New Architecture of Global Finance (Wiley, November 2010).

About Restoring Financial Stability

Previously, many of these faculty developed 18 independent policy papers offering market-focused solutions to the financial crisis, which were published in a book, Restoring Financial Stability: How to Repair a Failed System (Wiley, March 2009).

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