Tim Geithner: 'No Credible Evidence' Dodd-Frank Act Hurting Economy
In many ways, it's too early to pass many judgments on Dodd-Frank.
U.S. financial regulators said in a report released on Thursday that it is still "too early to determine" whether differences in financial rules across borders will pose a threat to economic stability.
The report, written by the Securities and Exchange Commission and the Commodities Futures Trading Commission, noted nonetheless that the two agencies are working "to analyze requirements and to coordinate regulatory proposals to the greatest extent possible." Some investors have threatened to move to countries with the most flexible rules, similar to the race to the bottom often seen among corporations looking to pay both workers and governments less, according to the Financial Times.
On the same day, Treasury Secretary Timothy Geithner argued it's too early to tell if Dodd-Frank financial reform, a punching bag for Republican presidential candidates and financial industry advocates alike, has hurt the economy.
"There is no credible evidence to support the argument that these reforms are having a material negative effect on the ability of the economy to recover and grow," Geithner said, according to Politico. "In fact, the evidence is overwhelmingly the opposite."
Geithner then turned the criticism around at Dodd-Frank critics, arguing they themselves are increasing financial uncertainty.
"Those who are working to slow the pace of reform will only increase uncertainty, and they will damage our efforts to try to get the rest of the world to adopt a level playing field," Geithner said, according to Bloomberg News.
The financial industry has spent large sums of money to try to water down the implementation of the Dodd-Frank Act. Many major banks, including Goldman Sachs, JPMorgan Chase, and Bank of America, have lobbied Congress to grant exceptions to trading derivatives abroad. Financial institutions spent more than $150 million on lobbying for the second year in a row in 2011, as their focus shifted from Congress to the regulators themselves.
Republican presidential candidates have almost unanimously supported the repeal of Dodd-Frank. Mitt Romney on his website called it a "burden" on the economy, and Newt Gingrich labeled the bill "a regulatory Tower of Babel that is paralyzing the American economy."
Wall Street is bracing for a leaner new era, partly because of oncoming regulations. Altogether, the global financial services industry slashed more than 200,000 jobs last year, according to Bloomberg News. And Citigroup, for one, is shutting down its proprietary trading desk as it anticipates the implementation of the Volcker rule, a regulation meant to curtail banks' ability to make risky bets with their own money.
Most major banks -- including Goldman Sachs, Citigroup, Morgan Stanley, and Bank of America -- have handed out more modest bonuses for 2011 as they anticipate lower profits, partly as a result of new financial regulations.
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The Huffington Post Bonnie Kavoussi First Posted: 02/ 3/2012 5:13 pm Updated: 02/ 3/2012 5:36 pm