It is hard to believe it has been ten years since the stock market began crashing into the worst recession since the Great Depression.  The key event was the collapse of Bear Stearns, a well-respected investment house.  In the aftermath, amidst cries of “Never Again,” a well-intentioned Congress produced the Dodd-Frank legislation.

Like any complex legislation, it had bugs to work out.  Like any complex legislation, it needs to change with the times.  There is now a movement in Congress to update or curb some of the excesses.  They are right that the reporting requirements are too onerous.  Congressmen may be too zealous of raising the limit to $250 billion assets for firms to avoid excess supervision, instead of $100 billion. 

I would remind Congress that the primary tool to prevent another financial crisis is more capital.  The Republican House wants to increase the amount of leverage or debt that a bank may issue.  This is a mistake!  Reduce regulation, not capital.

Second, the Dodd-Frank Act was born before cyber-crime and desperately needs updating.

Third, for all its faults, the Federal government saved the economy in 2008/9.  Well, actually it was the Fed and regulators who saved us.  Except for TARP, Congress was useless.  In the vein of shooting the survivors, the Dodd-Frank legislation reduced the flexibility of the Fed and regulators to ever save us again.  No matter the problem, the Dodd-Frank legislation has already pre-determined the response.  If we experience another financial crisis, the Fed and the regulators don’t have the flexibility to be innovative. 

When Bear Stearns crashed ten years ago, the commercial bank of JPMorgan bought Bear Stearns with assistance from the Fed.  That was a crucial move and a smart move.  But, Dodd-Frank makes that impossible now.  That makes us less safe!