Four Simple Ideas to Save the Financial System

By Barbara A. Rehm

Regulators implementing the Dodd-Frank Act are writing massive, complicated rules that corporations will maneuver to exploit and federal examiners will struggle to enforce.  There has to be a better way, right? The answer is clear: we need to engage in some clean-slate thinking about fundamental issues like bank funding and capital.  Perhaps no one in government, but Karen Shaw Petrou, co-founder of Federal Financial Analytics, has spent a lot of time assessing what she calls “complexity risk,” or “the burden on financial institutions and regulators of complex, cross-cutting and sometimes incomprehensible rules.”  Petrou calls this risk “the most significant impediment to financial-market recovery and robust economic growth.” FedFin is pulling together its analysis into a white paper that will dig deep into Dodd-Frank rulemaking and propose a series of reforms to everything from corporate governance to liquidity and beyond.