3 Reasons Dodd-Frank Is Doomedhttp://www.fool.com/investing/general/2012/02/20/3-reasons-dodd-frank-is-doomed.aspx Jeremy Bowman
February 20, 2012
As the Dow reaches levels it hasn't seen since the spring of 2008, it may seem that the market has finally recovered from the nightmarish financial crisis. Unemployment remains high and housing is stuck in neutral, but overall the economy is looking up.
Unfortunately, little has changed underneath the surface. The too-big-to-fail banks have only consolidated and become bigger. The Securities and Exchange Commission is hopelessly playing catch-up, and the banks continue to resist regulation, as we've seen from their comments on the Volcker Rule.
The Dodd-Frank Act was supposed to fix this, but, I'm afraid, it's doomed. Here's why:
JP Morgan Chase (NYSE: JPM ) , for example, settled six fraud cases over the last 13 years, but has received at least 22 waivers. Bank of America (NYSE: BAC ) along with its crisis acquisition, Merrill Lynch, settled 15 fraud cases and got at least 39 waivers. Even Goldman Sachs (NYSE: GS ) maintained those privileges despite paying a $550 million settlement for misleading subprime mortgage investors. Of the major banks only Citigroup (NYSE: C ) has had significant privileges revoked.
Former SEC Chairman David Ruder said that without the waivers, those firms would have trouble staying in business. Equally confounding is the SEC's habit of granting waivers to repeat offenders that had settled previous charges by agreeing not to break the very laws that the government agency was now accusing them of breaking once again.
Lack of funding
Though the Republicans cited cost control as one of their reasons for slashing the commission's budget, the SEC actually acts as a profit center for the government, generating income from transaction fees and fines, which goes back to the Treasury after the agency's budget has been met. In 2011, the SEC wrested more than $2.8 billion in fines from lawbreakers.