Real Dodd-Frank issue is not repeal

The Boston Globe ran an editorial today,  “Not Too Big to Flail,” pointing to the UBS employee fraud as reason to leave all the Dodd-Frank provisions in place, a position I favor but believe to be insufficient to the real task in consumer and banking regulation.

With few exceptions, the financial regulators already in place when the financial system exhibited symptoms of weakness, failed either to read the signs or to respond to them before it was too late.

Dodd-Frank can stay wholly in place to nearly no constructive effect if the regulations implementing its provisions are not reasonably well-enforced.  Not every regulation must be enforced to its extreme and not all can be enforced given the volume of issues but a diligent regulatory authority committed to avoiding any future problems of the kind we’ve had will be essential to keep Dodd-Frank from being dead whatever its official status.

For the record, this does not mean that people from the financial industry and economists should be excluded as biased, they are essential.  Without them our regulators are amateurs likely to have only a superficial grasp of the consequences of their decisions – and they too suffer from biases as we all do.  Understanding the present and near past as well as anticipating the near and long term future are difficult in the extreme and will still include mistakes.  We need our best efforts to do them.

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