The Troubled Asset Relief Program, established under the Emergency Economic Stabilization Act of 2008, represented unprecedented government intervention into the private financial marketplace. Federal financial policy (including opacity in the easy money practices of the Federal Reserve) and the resulting mortgage panic that precipitated TARP were all preludes to the much larger economic fragility resulting from government bailouts. This hazard culminated in the Dodd-Frank Financial Regulatory Reform bill in 2010, which will require over 500 different rule-makings to be entirely fleshed out.
Higher regulatory costs of Dodd-Frank are thus hard to predict. Parts of the bill, such as Section 1075 which places price controls on interchange fees, may cost businesses as much as $39 billion. Uncertainty of coming intervention and rule makings from the Consumer Financial Protection Bureau (CFPB) will further stagnate financial activity and decrease liquidity and credit. The Dodd-Frank bill further enshrines “too big to fail” in federal financial policy, significantly threatening a fluid and productive financial market.
The Center will follow future rule makings by the CFPB and Treasury, action undertaken by the Securities and Exchange Commission (SEC) and other regulatory threats to business by legislative or executive powers.
TAGS: Financial Services