The financial crisis of 2008 propelled the Congress of the United States of America to respond by taking action in order to try to find solutions for the nation’s economic problems. The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act was the product of Congress’ response to the crisis. However, nearly two years after the passage of the Dodd-Frank Act, questions still persist. Is the Act the codification of economic ideals that will positively transform the United States’ economy, or is the Act just another knee-jerk reaction of new Federal corporate regulations in response to market turmoil?
The Dodd-Frank Wall Street Reform and Consumer Protection Act (July 21, 2010) mandates that the United States Securities and Exchange Commission (SEC) propose and adopt rules for more than ninety provisions of the Act. This also includes discretionary rulemaking authority for several other provisions within the Act. According to the SEC, only 75% of those mandatory rules have been written and adopted as of September, 2012, over two years after the Dodd-Frank Act was signed into law. This delay is a source of concern and increased speculation for all participants in the process.
Economic regulatory reform in response to economic crisis can be found to have occurred multiple times throughout history. Within the past 400 years, the government bodies of Western Europe and Great Britain have enacted such reforms to prevent or cull economic catastrophe. In his 1998 book, Anglo-American Securities Regulation: Cultural and Political Roots, 1690-1860, Stuart Banner explains that “new regulation tended to come immediately after price declines.” The question before us now is this: Is the Dodd-Frank Act a well-planned, well-thought-out economic plan which will ultimately lead to the sought after recovery of the United States’ economy or something entirely different?
Scholars continue to debate this question. Minnesota Law Review scholars have compared the Dodd-Frank Act to the Sarbanes-Oxley Act of 2002 (SOX). The reviewers looked at whether the Dodd-Frank Act was yet another example of “quack corporate governance,”1 in the same vein as SOX. Their answer was affirmative. The researchers found there is evidence to support the determination that Dodd- Frank actually complicates the economic recovery process through a series of mandates that will hinder our recovery and cost billions of dollars to implement.
Further, the conflict between the states’ rights to regulate corporations incorporated within their borders and the addition of laws and regulations imposed by the federal government is setting up a future battle between state regulation and an overall federal regulation of corporations. The Minnesota Law Review asked, “Has Dodd-Frank further eroded the system of competitive federalism that is the unique genius of American corporate law by displacing state regulation with federal law?” Only time will tell.
It is to be determined whether legal appeals to the Dodd- Frank Act will be successful. What is certain is that times of economic crisis will continue to plague the US economy. What is uncertain is whether the Dodd-Frank legislation will help or hinder the present push to reform and repair our economy and the effect it will have on our economic future.
1Stephen M. Bainbridge, Dodd-Frank: Quack Federal Corporate Governance Round II, 95 Minnesota Law Review 1783 (2011).