The Incomplete Greatness of Barack Obama
In addition to resolving the immediate crisis, the administration tried to insure against a repeat of it by issuing a plan to expand federal regulation of the financial markets, a plan that ultimately became the Wall Street Reform and Consumer Protection Act, otherwise known as Dodd-Frank. The new law, which passed with almost no GOP votes, has been scathingly criticized since it first appeared in the House— by conservatives for being a big-government power grab and by liberals and various academic experts for being too weak.
But as Michael Konczal of the Roosevelt Institute explains, the new law parallels and expands upon the great achievements of New Deal financial regulation. Much as the Securities Act of 1933 and the Securities Exchange Act of 1934 mandated transparency in the securities markets and created the SEC to punish fraud, Dodd-Frank creates a new Consumer Financial Protection Bureau (CFPB) to do the same for everything from mortgages to credit cards. The Securities Exchange Act forced stock trading onto exchanges and mandated that traders have sufficient collateral. Similarly, Dodd-Frank pushes financial derivatives into clearinghouses and exchanges. The 1933 Glass-Steagall Act forced the separation of commercial banks from the more speculative activities of investment banks. The new so-called Volcker Rule in Dodd-Frank limits the ability of banks to trade securities for the firm’s own profit. Glass-Steagall also created the FDIC to monitor commercial banks and take them over if they get into financial trouble. Dodd-Frank gives the FDIC “resolution authority” over the “too big to fail” financial behemoths so that they too can be monitored and taken over if necessary.