World Socialist Web Site Discusses Failures of Dodd-Frank; Calls Statute Meaningless

In a World Socialist Web Site ("WSWS") article titled, "The Dodd-Frank Banking Law Five Years On," the WSWS considers the legacy of the Dodd-Frank Act.

Referring to Dodd-Frank as "a smokescreen intended to deceive the American public into thinking that something substantive has been done about Wall Street," the article compared the aftermath of the 1929 stock market crash to that of the 2008 financial breakdown, reviewing the regulatory responses by the government after each. The WSWS credited the 1929 response for the indictment of leading Wall Street bankers, the break-up of banking empires, and significant financial reforms such as the Glass-Steagall Act. In contrast, according to the WSWS, after the 2008 crisis the Department of Justice implemented a "series of sweetheart deals with [major U.S. banks] protecting the executives from prosecution and facilitating the growth of their control over the national economy."

The WSWS criticized the Dodd-Frank Act as being part of a "cover-up" which "shielded the industry from oversight and regulation," pointing to "immense lobbying efforts" for contributions made by the financial sector to the drafters of the Act. The WSWS specifically criticized four sections of the bill: (i) living wills; (ii) the Volcker Rule; (iii) limitations on derivatives trading; and (iv) incentive-based banker pay. In each section, the WSWS described problems ranging from non-implementation to loopholes and hedges worked into the bill, which have rendered restrictions on activities such as proprietary trades "virtually meaningless."

The WSWS concluded that the Dodd-Frank Act has "given a free pass to Wall Street as the financial system heads toward a new and even more disastrous crisis."

Lofchie Comment: One could criticize WSWS for getting a number of facts wrong, for some overwrought analogies, and for a general lack of sophistication on economics and financial regulation. But the WSWS commentary is not so far different from what one reads from commenters of all stripes across the major press outlets. The general point of concern, as demonstrated by various studies of financial literacy, is that knowledge of finance and economics is so low there exists only a shallow ability to discuss how financial institutions actually operate or how they should be properly regulated.

Lofchie YouTube Selection: This Land Is Your Land.

See: WSWS Article: "The Dodd-Frank Act Banking Law Five Years On."
See also: WSWS Article: "Eric Holder Returns to Law Firm that Represents Wall Street Banks."
Related news: House Agriculture Committee Considers Testimony on Global Derivatives Reforms (with Delta Strategy Group Summary and Lofchie Comment) (July 29, 2015); House Financial Services Committee Considers Impact of Dodd-Frank (with Delta Strategy Group Summary) (July 28, 2015).