Banking Reform’s Fear Factor

WASHINGTON, DC – Nearly five years after the worst financial crisis since the 1930’s, and three years after the enactment of the Dodd-Frank financial reforms in the United States, one question is on everyone’s mind: Why have we made so little progress?

New rules have been promised, but very few have actually been implemented. There is not yet a “Volcker Rule” (limiting proprietary trading by banks), the rules for derivatives are still a work-in-progress, and money-market funds remain unreformed. Even worse, our biggest banks have become even larger. There is no sign that they have abandoned the incentive structure that encourages excessive risk-taking. And the great distortions from being “too big to fail” loom large over many economies.