Dodd-Frank is election year non-issue


As the 2012 election storms toward a conclusion, it's fair to say that Dodd-Frank and the need to fix the "too big to fail" problem never quite ignited as issues.

In this era of poll-driven campaigning, it's likely that big banks just weren't resonating with the public in a way that would produce tangible campaign benefits for either side. There was no real upside to running on such issues. But "too big to fail" is alive and well as a pressing public policy concern.

A New York Times commentary notes that, "Many Americans probably think the Dodd-Frank financial reform law will protect taxpayers from future bailouts. Wrong. In fact, Dodd-Frank actually widened the federal safety net for big institutions. Under that law, eight more giants were granted the right to tap the Federal Reserve for funding when the next crisis hits. At the same time, those eight may avoid Dodd-Frank measures that govern how we're supposed to wind down institutions that get into trouble. In other words, these lucky eight got the best of both worlds: access to the Fed's money and no penalty for failure."

There are other beneficiaries as well. The central clearinghouses, to which the law is pushing vast amounts of OTC derivatives trading, also get access to the window. As for banks, it hasn't been a complete cakewalk. The Financial Stability Board released recently its annual list of global systemically important banks, which include Bank of America, Bank of New York Mellon, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, State Street and Wells Fargo.

As of now, this puts them in line for higher capital ratio requirements as per Basel III.

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- here's the commentary

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