Streetwise Professor Discusses Limitations of Dodd-Frank

In a blog post titled "The Fifth Year of the Frankendodd Life Sentence," University of Houston finance professor Craig Pirrong discussed certain limitations of the Dodd-Frank Act. Mr. Pirrong stated that "the systemic risk effects of the mandate are at best a push," and that, at their worst, the effects are negative. He also pointed out that the source of systemic risk derives from the huge liquidity strain that clearing creates when the market is stressed.

Mr. Pirrong asserted that while the Dodd-Frank Act was intended to reduce concentration and interconnectedness in the financial system, its huge regulatory overhead had the reverse effect. Mr. Pirrong argued that the drafters of the Dodd-Frank Act should have focused on raising capital requirements for banks and other financial institutions with "liquidity and maturity mismatches."

See: Streetwise Professor, "The Fifth Year of the Frankendodd Life Sentence."Related news: Republicans Criticize Dodd-Frank on the Fifth Anniversary of the Act (July 21, 2015); House Financial Services Committee Releases Video Criticizing Dodd-Frank (July 20, 2015); ISDA Marks Progress and Continuing Challenges in Five-Year Review of Dodd-Frank Act (July 20, 2015); AEI Issues Special Polling Report on Five-Year Anniversary of Dodd-Frank (with Lofchie Comment) (July 20, 2015); Mercatus Scholars Quantify Surge in Regulatory Restrictions after Dodd-Frank Act (July 20, 2015).