SEC Commissioner Daniel M. Gallagher recently said before the U.S. Chamber Center for Capital Markets Competitiveness that while Dodd-Frank pushes for regulatory reform, the legislation is “overwhelmed by a grab bag of wish-list items.”
“What continues to amaze me about the Act is not only what it covers in its 2319 pages, but also the crucial regulatory issues it does not address,” Gallagher said. “The juxtaposition of the two is jarring. The Act tasks the SEC with a mandate to create unprecedented new disclosure rules relating to conflict minerals from the Congo—but not to reform money market mutual funds, which, we were later told, are ticking time bombs of systemic risk.”
Gallagher said that under the legislation “justifies its mandates as answers but only after asking the wrong questions.”
“I suppose that this shouldn’t be a surprise given that the statute was not the product of bipartisan compromise and was enacted shortly after the onset of the crisis—and many months before the bodies charged with examining the causes of the crisis issued their reports,” Gallagher said. “This was a markedly different approach than the deliberative process undertaken after the 1929 stock market crash.”
Additionally, Gallagher said that the legislation has tasked federal agencies with numerous rule-makings, adding that the SEC has been rushed to issue “inadequate” rule proposals.
“Smart regulation requires taking the time to understand the problem that needs to be addressed, including not only the proximate cause of the problem but also the often complex and hidden factors underlying that problem,” Gallagher said. “It is at this stage where the peril of false narratives is at its greatest, for incorrectly identifying the causes of a problem—whether outright or by oversimplifying complicated issues—makes finding the right solution far more difficult, if not impossible.”