Dodd-Frank Called Too Weak by Former SEC Commissioner

Bloomberg Law’s Lee Pacchia interviews the former Commissioner of the SEC of the much maligned Dodd-Frank bill.

Roberta Karmel told Bloomberg Law on Tuesday that Dodd-Frank financial reform isn’t strong enough to stop another financial crisis.

“This is not a recipe for strong regulation,” said Karmel, who is now a professor at Brooklyn Law School. “We not only did nothing to change the balkanization of the regulatory system; we actually made it a little bit worse by creating FSOC [the Financial Stability Oversight Council].”

“We have to eliminate the problem that comes along with too-big-to-fail: that of socializing losses and privatizing profits,” Karmel told Barron’s. “Such a system is antithetical to any notion of the capitalist ideal.”

Some critics say that the Dodd-Frank Act, signed into law by President Obama in 2010, is unlikely to enact tangible change within the financial industry. Former Federal Reserve chairman Paul Volcker, the inspiration behind a rule to prevent banks from making risky bets with their own money, said in September that Dodd-Frank is “nowhere near what we need.”

The question of too-big-to-fail banks, he said, has “not yet been convincingly settled.”