Might we take time out from watching Obamacare implode to ask how the implementation of the Obama administration’s other signature legislative achievement, the Dodd-Frank financial reform law, is rolling along?
You don’t want to know. Davis Polk & Wardwell has been keeping track of things, and reports the following:
– Of the law’s 280 required rulemaking deadlines that have come and gone so far, only 170, or 61%, have been missed.
– Of the total of 398 rules the law requires, 162, or 41%, have been met with finalized rules. Another 121 (30%) have been proposed but not yet finalized. Fully 115 (29%) have not even been drafted yet.
Less-than-stellar progress, in other words. As a reminder, Dodd-Frank was signed into law over three years ago. Reasonable people can disagree whether the law is a wise piece of legislation or not. Regardless, here we are, three years later, and bureaucrats haven’t even managed to get halfway through writing the rules Dodd-Frank mandates. The main reason for the holdup, of course, is the sheer size of the project. Dodd-Frank runs to 850 pages, and aspires to micro-regulate vast swaths of one of the country’s biggest and most consequential industries. So there’s mandated debit-card price-capping to be implemented here, certified subprime-friendly qualified mortgages to be designed there, and the introduction of sweeping trading controls on depositary institutions over there.
It never ends. At some point, though, the logistics of the real world collides with the towering progressive aspirations embodied in the law–and as a result, nothing gets done at all. That’s what’s happening with Dodd-Frank now. It’s not that the regulatory mechanisms the law put in place are running haltingly, or in ways the law’s authors didn’t intend. Rather, the task before the rule writers is so immense that, for years now, a lot of the mechanisms still aren’t working at all.
This is no way to regulate an industry. While the rule-writers scribble away in Washington, the financial services providers that will have to live under the rules once they’re eventually finalized are more or less frozen in place. How is that a good idea-for consumers or providers?
It’s no secret that I think Dodd-Frank is a bad idea that won’t do much to help prevent the next financial crisis when (when!) it arrives. But the law as it’s being implemented is turning out to be even worse than I expected. Congress in its wisdom has passed legislation so big and complex that, for all practical purposes, it’s beyond the ability of the federal government to carry out. In the meantime, large parts of the financial services industry can only sit and wait. There’s got to be a better way.
What do you think? Let me know!