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Wednesday, October 3, 2012

KC Federal Reserve President: Dodd-Frank Act is Full of Complexity

Esther George, president and CEO of the Kansas City Federal Reserve, gave a speech to the Financial Stability Institute—China Banking Regulatory Commission were she stated that major U.S. banking reforms may actually make matters worse.
Unfortunately, governance and market discipline mechanisms are at risk of being diluted by a panoply of regulations. Nowhere is this more obvious than in the Dodd-Frank Act...

[A] reason for altering our supervisory approach is that we risk adding complexity to financial regulation without increasing the effectiveness of our supervision...

The Dodd-Frank Act itself is full of complexity. This law is hundreds of pages long and its mandated rule-making by some estimates could run to as much as 30,000 pages. In contrast, one of the most significant pieces of U.S. banking legislation, the Banking Act of 1933, is only 37 pages long...

Will more complex regulations contribute to a more stable financial system? After having spent most of my career as a bank supervisor, I have my doubts.
Read George’s full remarks.

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