The Dodd-Frank Wall Street Reform and Consumer Protection Act: Accomplishments and Limitations

16 Pages Posted: 21 Mar 2011

See all articles by Viral V. Acharya

Viral V. Acharya

New York University - Leonard N. Stern School of Business; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER); New York University (NYU) - Department of Finance

Thomas F. Cooley

New York University - Leonard N. Stern School of Business; National Bureau of Economic Research (NBER)

Matthew P. Richardson

New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER); AQR Capital Management, LLC

Richard Sylla

New York University - Stern School of Business, Department of Economics

Ingo Walter

New York University - Leonard N. Stern School of Business; New York University (NYU) - Department of Finance

Date Written: March 18, 2011

Abstract

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 is widely described as the most ambitious and far-reaching overhaul of financial regulation in the United States since the 1930s. Together with other regulatory reforms introduced by regulatory agencies globally, the Act aims to put an end to the too-big-to-fail problem and is expected to alter the structure of financial markets in profound ways. This article provides an overall assessment of the Act in three different ways: first, in light of first economic principles, or how theory suggests we should regulate the financial sector, given the systemic risk externality each financial firm imposes on other firms and the rest of the economy; second, from a comparative perspective that views the proposed reforms in relation to those undertaken in the 1930s following the Great Depression; and, finally, in the form of an assessment of how the proposed reforms would have fared in preventing and dealing with the crisis of 2007-2009 had they been in place at the time. The article also highlights key areas that are left wholly or partly unaddressed by the Dodd-Frank Actnotably, the pricing of explicit and implicit government guarantees; dealing with inevitable opportunities for the financial sector to engage in regulatory arbitrage; and containing the systemic risk arising from collections of small institutions and markets such as money market funds and repo contracts.

Suggested Citation

Acharya, Viral V. and Cooley, Thomas F. and Richardson, Matthew P. and Sylla, Richard and Walter, Ingo, The Dodd-Frank Wall Street Reform and Consumer Protection Act: Accomplishments and Limitations (March 18, 2011). Journal of Applied Corporate Finance, Vol. 23, Issue 1, pp. 43-56, 2011. Available at SSRN: https://ssrn.com/abstract=1790189 or http://dx.doi.org/10.1111/j.1745-6622.2011.00313.x

Viral V. Acharya (Contact Author)

New York University - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

HOME PAGE: http://pages.stern.nyu.edu/~sternfin/vacharya/public_html/~vacharya.htm

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

New York University (NYU) - Department of Finance

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

Thomas F. Cooley

New York University - Leonard N. Stern School of Business ( email )

44 West Fourth Street, 7-180
Room 7-85
New York, NY 10012
United States
212-998-0870 (Phone)
212-995-4218 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Computer Research Center
Cambridge, MA 02138
United States

Matthew P. Richardson

New York University (NYU) - Department of Finance ( email )

44 West 4th Street
Suite 9-190
New York, NY 10012-1126
United States
212-998-0349 (Phone)
212-995-4233 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

Richard Sylla

New York University - Stern School of Business, Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States
212-998-0869 (Phone)

Ingo Walter

New York University - Leonard N. Stern School of Business ( email )

44 West 4th Street
New York, NY 10012
United States
212-998-0707 (Phone)
212-995-4220 (Fax)

New York University (NYU) - Department of Finance

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
6
Abstract Views
1,088
PlumX Metrics