Description
The good, the bad, and the scary of Washington's attempt to reform Wall Street
The Dodd-Frank Wall Street Reform and Consumer Protection Act is Washington's response to America's call for a new regulatory framework for the twenty-first century.
In The New Financial Deal, author David Skeel offers an in-depth look at the new financial reforms and questions whether they will bring more effective regulation of contemporary finance or simply cement the partnership between government and the largest banks.
- Details the goals of the legislation, and reveals that how they are handled could dangerously distort American finance, making it more politically charged, less vibrant, and further removed from basic rule of law principles
- Provides an inside account of the legislative process
- Outlines the key components of the new law
To understand what American financial life is likely to look like in five, ten, or twenty years, and how regulators will respond to the next crisis, we need to understand Dodd-Frank. The New Financial Deal provides that understanding, breaking down both what Dodd-Frank says and what it all means.
Table of Contents
Foreword ix
Introduction xi
A Few Major Characters xv
Chapter 1 The Corporatist Turn in American Regulation 1
The Path to Enactment 3
The Two Goals of the Dodd-Frank Act 4
A Brief Tour of Other Reforms 6
Two Themes That Emerge 8
Fannie Mae Effect 11
Covering Their Tracks 12
Is There Anything to Like? 14
Part I Relearning the Financial Crisis
Chapter 2 The Lehman Myth 19
The Stock Narrative 20
Lehman in Context 23
Lehman’s Road to Bankruptcy 26
Lehman in Bankruptcy 29
Bear Stearns Counterfactual 31
Road to Chrysler 33
Chrysler Bankruptcy 35
General Motors “Sale” 38
From Myths to Legislative Reality 39
Part II The 2010 Financial Reforms
Chapter 3 Geithner, Dodd, Frank, and the Legislative Grinder 43
The Players 44
TARP and the Housing Crisis 47
Road to an East Room Signing 49
Channeling Brandeis: The Volcker Rule 54
The Goldman Moment 56
Chapter 4 Derivatives Reform: Clearinghouses and the Plain-Vanilla Derivative 59
Basic Framework 61
Derivatives and the New Finance 63
The Stout Alternative 66
New Clearinghouses and Exchanges 68
Regulatory Dilemmas of Clearinghouses 69
Disclosure and Data Collection 74
Making It Work? 75
Chapter 5 Banking Reform: Breaking Up Was Too Hard to Do 77
Basic Framework 78
New Designator and Designatees 79
Will the New Capital Standards Work? 82
Contingent Capital Alternative 84
Volcker Rule 85
What Do the Brandeisian Concessions Mean? 91
Office of Minority and Women Inclusion 93
Institutionalizing the Government-Bank Partnership 94
A Happier Story? 95
Repo Land Mine 96
Chapter 6 Unsafe at Any Rate 99
Basic Framework 100
Who is Elizabeth Warren? 102
Toasters and Credit Cards 105
The New Consumer Bureau 106
Mortgage Broker and Securitization Rules 109
Consequences: What to Expect from the New Bureau 111
What It Means for the Government-Bank Partnership 114
Chapter 7 Banking on the FDIC (Resolution Authority I) 117
Does the FDIC Play the Same Role in Both Regimes? 118
How (and How Well) Does FDIC Resolution Work? 122
Moving Beyond the FDIC Analogy 126
Chapter 8 Bailouts, Bankruptcy, or Better? (Resolution Authority II) 129
Basic Framework 130
The Trouble with Bailouts 132
Who Will Invoke Dodd-Frank Resolution, and When? 135
Triggering the New Framework 137
Controlling Systemic Risk 142
Third Objective: Haircuts 145
All Liquidation, All the Time? 148
Part III The Future
Chapter 9 Essential Fixes and the New Financial Order 155
What Works and What Doesn’t 156
Staying Derivatives in Bankruptcy 158
ISDA and Its Discontent 163
Other Bankruptcy Reforms for Financial Institutions 168
Plugging the Chrysler Hole in Bankruptcy 170
Bankruptcy to the Rescue 173
Chapter 10 An International Solution? 175
Basic Framework 176
Problems of Cross-Border Cases 177
Scholarly Silver Bullets 181
Dodd-Frank’s Contribution to Cross-Border Issues 182
New Living Wills 185
A Simple Treaty Might Do 186
Risk of a Clearinghouse Crisis 188
Reinvigorating the Rule of Law 189
Conclusion 191
Notes 195
Bibliography 205
Acknowledgments 211
About the Author 212
Index 213
