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The Dodd-Frank Wall Street Reform and Consumer Protection Act, aimed at improving the stability of the financial system, became law on July 21, 2010. It’s worked, but it’s also left holes some argue have made the system more vulnerable. Too Big To Fail banks live on, potentially more threatening to the financial system than ever. “Banks are way larger now than they were going into the crisis,” says Cornelius Hurley, director of the Center for Finance, Law & Policy at Boston University. “Despite hundreds of pages of law and thousands of pages of regulations, the system itself is not any safer, to the extent that it’s at the mercy of six clearly too-big-to-fail banks.”
Dodd-Frank is maddeningly complex, and many of the key rules haven’t even been finalized. On the positive side, regulators are more aware of the threat of systemic risk, consumers have an agency looking out for their interests, and banks are better capitalized and more limited in the risks they can take. Dodd-Frank is a step forward, not a giant leap. Says Michael Greenberger, a former director at the Commodity Futures Trading Commission: “The scheme may not be perfect, but there is a lot in there that ends irresponsible, undercapitalized bets.”