Four years later, Dodd-Frank fails to turn banks into pet shops

Fortune ^ | 7-25-2014 | Stephen Gandel

[Citizen Zed]

The paper argues that when you prevent banks from making risky bets with their own money, they won’t stop betting. They’re banks, after all. Instead, they will put more of their money into stuff that is less risky. And they will lend more, which is also risky, but allowed by Dodd-Frank. Also, the banks will pay dividends, which doesn’t sound risky. But if you allow banks to use their capital to pay dividends, they won’t have as much money around to cover loans when they go bad.

[Citizen Zed]

Obama: "So it will never happen again"

[DannyTN]

The mistakes that were made were:

• Reducing the bank Reserve ratio to effectively 1%.
• Allowing banks to engage in risky behavior, the result of repealing Glass-Steagall, and failure to regulate credit default swaps.
• Allowing foreign competition that didn't play by our rules. And lowering our standards to compete with foreign competition.
• Relaxing mortgage standards only to tighten them again.

The following weren't banking mistakes but were contributory:

• Failing to prepare for another oil price shock.
• Lowering the import tariffs, resulting in much lost industry overseas.