Banking Under the Dodd-Frank Act

[Jefferson23]

By Simon Johnson

President Obama’s signing of the financial reform bill yesterday does not end our intense debates over banking – rather it just moves them to a new sphere. Instead of arguing about legislation, the next arena is the action (and perhaps inaction) of regulators.

Those pushing for more effective regulation of the financial system are looking for progress along three potential dimensions. The first two – raising capital standards and appointing new regulators – are the most discussed, but powerful interests are blocking real change. The third – tougher and smarter congressional oversight – holds great promise.
First, on key issues – such as capital standards – there could theoretically be a breakthrough in the so-called Basel Process of international negotiations, e.g., in the run-up to the November G20 summit in Seoul. Some senior US administration officials continue to make bullish off-the-record remarks, but Sheila Bair is sounding a much more cautionary note. And European participants continue to emphasize that Germany does not want a significant increase in capital for its banks.

The baseline view here must be that the “lowest common denominator” approach will prevail. This was the consensus at last week’s Future of Finance meeting in London – not at all encouraging.


in full: http://baselinescenario.com/2010/07/22/banking-under-the-dodd-frank-act/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+BaselineScenario+%28The+Baseline+Scenario%29