The Dodd-Frank Act: Key Features, Implementation Progress, and Financial System Impact

Abstract

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) of 2010 provides for a wide variety of new regulatory and supervisory initiatives with the goal to promote a safer and sounder banking system. Our paper puts Dodd-Frank into a historical perspective, identifies its key features, discusses the implementation progress, and assesses whether the law will accomplish its objectives. We conclude that the approach in the law to financial regulatory reform is best described as a Band-Aid approach to financial regulation. A better approach in our view is one that strengthens market discipline on bank risk-taking and enhances competition so as to reduce the regulatory burden and enhance the efficiency and stability of the financial system. Dodd-Frank pays lip service to this objective with the creation of an Orderly Liquidation Authority and the Financial Stability Oversight Council, with the effectiveness of both these new bodies being very much in doubt.