Monday, July 27, 2015
Five years on, former senator Phil Gramm provides a needed retrospective on Dodd-Frank. His assessment deserves to be read in full, but here is the worst part:
... Dodd-Frank has empowered regulators to set rules on their own, rather than implement requirements set by Congress. This has undermined a vital condition necessary to put money and America back to work -- legal and regulatory certainty.Gramm elaborates that this new power isn't even constrained by past legal precedent:
Over the years the Federal Trade Commission and the courts defined what constituted "unfair and deceptive" financial practices. Dodd-Frank added the word "abusive" without defining it. The result: The CFPB [Consumer Financial Protection Bureau] can now ban services and products offered by financial institutions even though they are not unfair or deceptive by long-standing precedent.It is bad enough that the economic recovery has been hampered by this law, but the specter of non-objective law is much worse -- so much so that Ayn Rand once called it, "the most effective weapon of human enslavement," since "its victims become its enforcers and enslave themselves."
Regulators in the Dodd-Frank era impose restrictions on financial institutions never contemplated by Congress, and they push international regulations on insurance companies and money-market funds that Congress never authorized. The law's Financial Stability Oversight Council meets in private and is made up exclusively of the sitting president's appointed allies. Dodd-Frank does not say what makes a financial institution systemically important and thus subject to stringent regulation. The council does. Banks so designated have regulators embedded in their executive offices to monitor and advise, eerily reminiscent of the old political officers who were placed in every Soviet factory and military unit. [bold added]