Take a look at these two articles in today’s New York Times. Both talk about how the same bank, JPMorgan Chase, is maneuvering in the rough-and-tumble, post-Dodd-Frank world of financial regulation. And both underscore a larger point, which I make in my article, “He Who Makes The Rules,” in this issue of the Washington Monthly: Dodd-Frank don’t mean nothin’ unless we get the rule-making and implementation right.
In the first article, by Jessica Silver-Greenberg, we do seem to be getting it right. She writes about how JPMorgan, under increasing pressure from the CFPB and the FDIC, is cracking down on payday lenders. Armed with adequately written and implemented Dodd-Frank rules, regulators can — and will — reign in big banks’ predatory behavior as the law intended. Good news, right?
Not so fast. The other article, by Jesse Eisinger, paints a grimmer picture. He writes that despite the Dodd-Frank overhaul in 2010, “nothing much has changed.” Case and point? Last spring, the OCC, fast asleep at the switch, allowed JPMorgan’s London office to make increasingly risky trades, leading to a crushing, multi-billion dollar whale-sized blow to the market. His conclusion, which is also right there in the headline, is that regulators have learned nothing — nothing! — from the financial crisis.
Obviously, both these articles can be, and probably are, simultaneously true. The OCC is notoriously lax, while the FDIC and CFPB are not. But, as Eisinger admits, grudgingly at the end, it’s a little too soon to write Dodd-Frank’s eulogy. The fat lady has yet to sing.
The OCC’s new head is currently cleaning house and the Volcker Rule (a behemoth of a thing with potentially far-reaching powers) has yet to be finalized, much less implemented or enforced. A refurbished OCC, armed with a meaningful Volcker Rule, could make a major difference in how effectively it regulates in coming years.
The point here is that Dodd-Frank is still very much a work in progress, and now is that time that we — and that includes lawmakers, and not just Sen. Carl Levin — need to start paying some serious attention to how it’s coming along. As I wrote in “He Who Makes the Rules,” nearly two-thirds of the rules and regulations coming from Dodd-Frank have yet to be finalized.
How the remainder of those rules get written, implemented and enforced will determine whether, a year or two from now, there are more stories like Silver-Greenberger’s or more stories like Eisinger’s in the news.