Recently I attended a panel organized by the NIRI New York chapter in conjunction with Baruch College’s Center for Corporate Integrity to look at Dodd-Frank and its impact one year after passing. The panel was led by David Rosenburg, a professor at Baruch’s business school, and included Joseph Engelhard from Capital Alpha Partners, William Tanona from UBS and Judy McLevey from NYSE Euronext. The panel provided a nice array of perspectives from multiple stakeholder viewpoints.
Consensus among NIRI panelists? Regulation should be repealed.
I was surprised that there seemed to be a general consensus among the panelists that Dodd-Frank, although well-intentioned, was poorly devised and should be repealed. The overall sentiment is that the realities of implementing the 400+ regulations that grew out of the law are beyond reasonable, and may actually drive the opposite results from what the act intended. I wasn’t surprised that people felt that way but I thought at least one person would stand up and defend it. The fact that none of the four presenters (experts in their respective fields) did was a bit of a shock.
Law could damage U.S. competitiveness although not as burdensome to small companies.
Part of the case made against the reform act is that it can significantly damage the United States’ competitiveness as a country. As the argument goes, the heavy capital restrictions likely to be imposed on banks will limit lending, thus slowing growth. The result? The U.S. becomes a less attractive destination for investment capital. This may be true, but this also suggests that, in order to be effective, financial firm regulations such as these need to be coordinated on a global scale, not implemented in silos by country. Many would disagree with this, arguing instead that Dodd-Frank takes global needs too much into consideration and that we need a solution customized to the United States.
Another interesting viewpoint was that Dodd-Frank will not place a disproportionate amount of burden on smaller companies, contrary to common perception. Unlike the Sarbanes-Oxley Act of 2002, which did result in smaller companies having to bear significantly larger costs relative to their size and resources compared with larger organizations, Dodd-Frank actually has more significant requirements for larger firms.
This is because the act was, to a certain extent, designed to reign in those very firms who were large enough to impact the broader economy. This doesn’t mean that small firms aren’t impacted, however. One of the panelists gave an example of a small, 12-person bank in Texas who had recently met on four separate occasions with over twenty regulators to review compliance issues.
Some easing of major requirements has already occurred (Volcker rule).
The good news (or bad news, depending how you look at it) is that as the rubber meets the road and the implementation realities set in with the regulators, we are starting to see some easing of the major requirements (e.g., the Volcker Rule).
Other implementations have already been delayed, although in some cases this is simply due to the volume of regulations that need to be implemented. In some ways, Dodd-Frank seems to have been an overreaction to the financial crisis, and may have gone too far.
2012 Elections likely to impact regulations.
The question is, will it safeguard our economy against future, similar crises without sacrificing our nation’s global competitiveness? No one can say for sure, but the rule definitions and implementations over the next year, followed by the 2012 U.S. elections, will determine Dodd-Frank’s impact one way or the other.
What do you think about Dodd-Frank? Has it impacted your company yet? Will the law be repealed? Leave a comment below.