A critical assessment of the Dodd-Frank Wall Street Reform and Consumer Protection Act

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by Viral Acharya, Thomas F. Cooley, Matthew Richardson, Richard Sylla and Ingo Walter

The global crisis started in US financial markets (Cecchetti 2007). US financial reform was thus always going to be a central pillar in the world's effort to avoid such crises in the future (Baldwin and Eichengreen 2008, Reinhart 2008, Acharya and Richardson 2009). After long deliberation and political haggling, the reform is finally ready in the form of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. This is widely described as the most ambitious and far-reaching overhaul of financial regulation in the US since the 1930s. Together with other regulatory reforms introduced by the Securities and Exchange Commission, the Federal Reserve (the Fed), and other regulators in the US and Europe, it is going to change the structure of financial markets in profound ways.

In our forthcoming book, Regulating Wall Street: The Dodd-Frank Act and the New Architecture of Global Finance, we provide our overall assessment of the legislation in three different ways:

  • From first principles in terms of how economic theory suggests we should regulate the financial sector;
  • In a comparative manner, relating the proposed reforms to those that were undertaken in the 1930s following the Great Depression;
  • How the proposed reforms would have fared in preventing and dealing with the crisis of 2007 to 2009 had they been in place at the time.
Read the full opinion editorial on VoxEU.org.

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About RegulatingWallStreet.com

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).

About the Authors