BUREAUCRATIC POLITICS AND FINANCIAL
REFORM IN THE OBAMA ADMINISTRATION1
ON JULY 21, 2010, President Barack Obama signed into law the DoddFrank Wall Street Reform and Consumer Protection Act, more commonly called the Dodd-Frank Act—named after Connecticut Senator Christopher Dodd and Massachusetts Representative Barney Frank. The Dodd-Frank Act, the most sweeping overhaul of American financial regulations since the New Deal, represents the Obama administration’s main structural attack on the financial crisis of 2008 and the Great Recession that followed it. The Obama administration’s financial reform proposals engendered substantial controversy and hundreds of millions of dollars in lobbying on various sides of the debate. These high stakes of financial politics reflect the massive transformations set in motion by the Act.
The Dodd-Frank Act takes large investment banks and, in some ways, fundamentally dismantles and reassembles them. One provision cleaves trading operations in derivatives and swaps from deposit-taking functions. Another provision allows only so much of a bank’s capital to be deployed in proprietary trading. A critical set of provisions—largely unnoticed in the late-stage debate on the Dodd-Frank bill and the aftermath of its summer 2010 passage—establishes stringent governance of credit rating agencies (such as Moody’s or Standard and Poor’s) and weakens their power in the global economy and government policy making. The Act boosts the requirements for how much basic capital banks must keep on hand as they engage in lending and investing. Additionally, the Dodd-Frank Act establishes, for the first time in American history, a federal agency explicitly dedicated to the regulation of