Impact of Dodd-Frank still unclear after two years

Jonathan Macey

As the two year anniversary of the Dodd-Frank Act approaches, it remains unclear whether the legislation has created a safer, sounder U.S. financial system.

Of the 398 total rules mandated under the financial reform law, only 119 have been finalized. Regulators have struggled to issue and finalize rules, leaving many American consumers and businesses uncertain about the regulatory future. Many of the rules will be created under newly established federal agencies, including the Consumer Financial Protection Bureau.

“Dodd-Frank is not directed at people,” Jonathan Macey, a corporate law professor at Yale University, said, according to The Washington Times. “It is an outline directed at bureaucrats and it instructs them to make still more regulations and to create more bureaucracies.”

Uncertainties may be problematic for a struggling and fragile U.S. economy. Additionally, many of the rules designed to protect American consumers have not been as beneficial as projected.

The interchange or “swipe” fee cap – the amount a bank can charge a merchant to process a debit transaction – was intended to lower costs for merchants. When the argument was presented to Congress, retailers claimed that any savings seen as a result of the cap would be passed to consumers in the form of lower prices. Recent data by the Electronic Payments Coalition, however, revealed that retailers have saved billions of dollars, while consumers have seen little windfall from the rule.

Additionally, as a result of the fee cap, banks struggled to deal with falling revenue, which ultimately led the institutions to issue fees in other areas. Free checking accounts have been pushed to the brink of extinction as a result of the measure.

“In the end, who winds up in the crosshairs of this bogus, big-government solution?” Ed Feulner, the president of the Heritage Foundation, said, The Washington Times reports. “Not the big banks but consumers. If we want ‘safer and more modern rules of the road for the financial industry,’ in [Treasury Secretary Timothy Geithner]’s words, we need to recognize Dodd-Frank as a dangerous dead end.”

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