The critical nuances of ongoing financial regulation are best evaluated by considering the relationship between involved parties. At the time of my first blog post, I had anticipated my paper to focus on the introduction of regulation by the federal government in the financial sector. Through the planning and research phases, I found this sole emphasis to be too “cut and dry” in the weight of its analysis. As a result, I decided to shift my focus to the relationship between federal regulators and Wall Street entities. This analysis would capture the evolving nature of the regulatory implementation process. In addition, it would expose the strengths and weaknesses of both the federal government and Wall Street in regards to the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
The timing of my research in relation to the rapidly changing regulatory schedule led me to slightly alter my use of sources previously mentioned in my first blog post. I routinely turned to sources very much a part of the financial sector. I found myself utilizing the work of “market watchers,” in order to maintain an updated understanding of the implementation process. I did not think my use of interviews would be necessarily advantageous at this time. If I were given the opportunity to address this topic in five years, then my interviews might prove to be more valuable. However, at this moment, I found the sources I used to be more constructive in the process of understanding evolving aspects of the regulatory environment.
I begin by discussing the history of U.S. financial regulation, believing it to be an important contribution to the 2010 Act. I discuss key areas of the Act, including the provision of capital requirements, the Volcker Rule and the extension of shareholder rights as they pertain to the analysis of a relationship between the two entities. I assess the implications posed by characteristics and strategies unique onto Wall Street and Washington and how these determine the development of the relationship. I conclude by suggesting areas where important lessons for future regulation may be drawn from Dodd-Frank.
Arguably the most salient takeaway from the paper-writing process has been the government’s failure to implement regulation in a coherent manner. The result of this has been repeated attempts of the financial sector to sidestep regulation in an attempt to maintain profitable and efficient business practices. I suggest that in many instances the financial sector cannot be held responsible for this reaction. It is the duty of the federal government to introduce regulation in a manner that does not negatively impede business. When the government has presented regulation in a clear and coherent manner, a favorable reaction from Wall Street has typically followed. There is an understanding that regulation is now the norm rather than the exception, and firms are responding accordingly. Indeed, the importance of the financial markets to the nation’s overall success is such that we must work to create an environment that will not lapse into a crisis similar to 2008. However, at the same time, it is the responsibility of the government to not introduce an equally dangerous crisis of regulation.
I look forward to seeing you all at the next conference.