Last week, we launched our new Financial Regulatory Reform Initiative. A centerpiece of the initiative’s work will be to take a fresh look at financial regulatory issues, including changes made by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Before a standing room only audience, Senator Mark Warner (D-VA) gave introductory remarks on the importance of the work the initiative is set to undertake. A member of the Senate Banking, Housing, and Urban Affairs Committee, and a key leader in drafting Dodd-Frank, the Senator provided his usual keen insight, telling the audience “I think looking back historically at any major piece of legislation, regardless of which party is in power, Congress never gets it right when you’re looking at massive reform legislation the first time through.”
The initiative is guided by co-chairs Martin Baily, former chairman of the Council of Economic Advisers under President Bill Clinton, and Phillip Swagel, former Treasury Assistant Secretary for Economic Policy under President George W. Bush. This bipartisan pair will provide broader direction to a bipartisan group of former regulators, policy advocates, academics and practitioners that have joined together to work on this important initiative.
By reviewing what Dodd-Frank does well, what could be improved, and what remains uncertain over two years after its passage, the initiative will shed light on next steps needed for financial regulatory reform. We will measure existing financial regulation by whether it strikes the appropriate balance between the benefits of increased stability against the costs imposed on economic growth. While rules increasing stability can often require a tradeoff that leads to decreased economic growth, Baily is optimistic that “there’s a lot of opportunity to make our regulatory system more efficient, so that without sacrificing safety or stability, it allows economic growth.”
The team recognizes that details matter and that beyond the strongly held views from both sides of the aisle lay specifics that can narrow the range of disagreement. As Swagel said at the launch, “part of what I want to do with this initiative is be detail oriented and not be at 50,000 feet, but get down to the ground level and say, what are the specifics?”
At the launch, the initiative unveiled a bipartisan group of leading experts who will divide their work into five substantive areas: (1) systemic risk; (2) failure resolution; (3) capital markets; (4) consumer protection; and (5) regulatory architecture.
The members of our initiative have an appreciation for bipartisan solutions when they see them. The Dodd-Frank Act’s Title II, which aims to eliminate “too big to fail” by creating a new way for certain financial institutions to dissolve, was cited by member Rodgin Cohen as a “superb example of bipartisanship.” He added, “you had Senators Warner and Corker. You had Senator Shelby; you had Senator Dodd and their staffs all working to get it right. This was not about politics; it was about getting it right.”
The work which lies ahead had much work that came before it. As member Richard Neiman said, “we should not be starting our view of regulatory architecture with a clean slate. We have to acknowledge we have a very unique system in this country, certainly in comparison to the rest of the world, with a historical foundation and some real political realities.”
In the days ahead, we look forward engaging the financial reform debate, pressing for the type of politically balanced policymaking that can appreciate the unique history and diverse nature of the U.S. financial system while still advocating for much needed changes.