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You would expect that a publication with a libertarian
tilt like The Economist would not look favorably at the Dodd-Frank
Wall Street Reform and Consumer Protection Act. They call it Too big not to fail. Being The
Economist, the article argues with the facts on its side.
"The scope and structure of Dodd-Frank are fundamentally
different to those of its precursor laws, notes Jonathan Macey of Yale Law
School: "Laws classically provide people with rules. Dodd-Frank is not directed
at people. It is an outline directed at bureaucrats and it instructs them to
make still more regulations and to create more bureaucracies."
It's not a matter of more regulation. The focus should be
on better regulation. Much of Dodd-Frank is just tacked on because it had the
momentum to become law. I'm pretty sure extractive minerals had nothing to do
with the financial crisis. But Section
1502 of Dodd-Frank requires public companies to make extensive disclosures
on the use of conflict minerals in their supply chain.
There are some good things. An unregulated derivatives
market was a bad thing. Although, I'm not sure they are getting the regulations
right in the new regulated derivatives market.
The test will be the next financial crisis. I assume one
will come. Inevitably there will be an oversupply of capital in some area of
investment and investors will run in to trouble. Companies will be in trouble,
consumer will be in trouble, and investors will be in trouble. Will Dodd-Frank
succeed in reducing that likelihood and reducing the impact? Only time will
additional commentary on developments in compliance and ethics, visit Compliance Building,
a blog hosted by Doug Cornelius.
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