Perhaps one day there’ll be another famous movie line: “Dodd-Frankly, my dear, I don’t give…” But probably not. Its not clear if Dodd-Frank has been a success or a failure.
It certainly has been a change.
From the regulated side, I think the failure or success depends on which part of Dodd-Frank affects you. New regulations make winners and losers. Most research shows that it makes it harder for new firms to enter the regulated space.
From 2009 to 2013 only 7 new banks were formed, fewer than 2 per year. From 1990 to 2008, over 2,000 new banks were formed, more than 100 per year. Its easy to blame that on Dodd-Frank, but the economy has been weak and interest rates low.
Certainly, big banks are not any smaller and few believe that too big to fail is gone. It brief glance at bank credit ratings, you can see a boost in the ratings for an implied government bail-out.
It also depends on how you rate size: amount of deposits, amount of assets, amount of lending activity.
We have seen the reach of the non-bank too big to fail labeled and then removed. The firms may be important, but not systemically important.
One of the clear winners is the compliance profession. Dodd-Frank clearly requires more compliance efforts and people to take on those efforts.
Sources:
- Regulating Away Competition: The Effect of Regulation on Entrepreneurship and Employment by James Bailey and Diana Thomas
- Where Are All the New Banks? The Role of Regulatory Burden in New Charter Creation by Robert M. Adams and Jacob P. Gramlich
- Big Banks Use a Footnote to Look Smaller by Matt Levine
- Credit for the title goes to Adrian Lurssen via G+