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The New Financial Deal: Understanding the Dodd-Frank Act and Its (Unintended) Consequences

ISBN: 978-1-118-01492-9
208 pages
November 2010
The New Financial Deal: Understanding the Dodd-Frank Act and Its (Unintended) Consequences (1118014928) cover image
The good, the bad, and the scary of Washington's attempt to reform Wall Street

The Dodd-Frank Wall Street Reform and Consumer Protection Act is Washington's response to America's call for a new regulatory framework for the twenty-first century.

In The New Financial Deal, author David Skeel offers an in-depth look at the new financial reforms and questions whether they will bring more effective regulation of contemporary finance or simply cement the partnership between government and the largest banks.

  • Details the goals of the legislation, and reveals that how they are handled could dangerously distort American finance, making it more politically charged, less vibrant, and further removed from basic rule of law principles
  • Provides an inside account of the legislative process
  • Outlines the key components of the new law

To understand what American financial life is likely to look like in five, ten, or twenty years, and how regulators will respond to the next crisis, we need to understand Dodd-Frank. The New Financial Deal provides that understanding, breaking down both what Dodd-Frank says and what it all means.

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Foreword.

Introduction.

A Few Major Characters.

Chapter 1 The Corporatist Turn in American Regulation.

The Path to Enactment.

The Two Goals of the Dodd-Frank Act.

A Brief Tour of Other Reforms.

Two Themes That Emerge.

Fannie Mae Effect.

Covering Their Tracks.

Is There Anything to Like?

Part I Relearning the Financial Crisis.

Chapter 2 The Lehman Myth.

The Stock Narrative.

Lehman in Context.

Lehman’s Road to Bankruptcy.

Lehman in Bankruptcy.

Bear Stearns Counterfactual.

Road to Chrysler.

Chrysler Bankruptcy.

General Motors “Sale”.

From Myths to Legislative Reality.

Part II The 2010 Financial Reforms.

Chapter 3 Geithner, Dodd, Frank, and the Legislative Grinder.

The Players.

TARP and the Housing Crisis.

Road to an East Room Signing.

Channeling Brandeis: The Volcker Rule.

The Goldman Moment.

Chapter 4 Derivatives Reform: Clearinghouses and the Plain-Vanilla Derivative.

Basic Framework.

Derivatives and the New Finance.

The Stout Alternative.

New Clearinghouses and Exchanges.

Regulatory Dilemmas of Clearinghouses.

Disclosure and Data Collection.

Making It Work?

Chapter 5 Banking Reform: Breaking Up Was Too Hard to Do.

Basic Framework.

New Designator and Designatees.

Will the New Capital Standards Work?

Contingent Capital Alternative.

Volcker Rule.

What Do the Brandeisian Concessions Mean?

Office of Minority and Women Inclusion.

Institutionalizing the Government-Bank Partnership.

A Happier Story?

Repo Land Mine.

Chapter 6 Unsafe at Any Rate.

Basic Framework.

Who Is Elizabeth Warren?

Toasters and Credit Cards.

The New Consumer Bureau.

Mortgage Broker and Securitization Rules.

Consequences: What to Expect from the New Bureau.

What It Means for the Government-Bank Partnership.

Chapter 7 Banking on the FDIC (Resolution Authority I).

Does the FDIC Play the Same Role in Both Regimes?

How (and How Well) Does FDIC Resolution Work?

Moving Beyond the FDIC Analogy.

Chapter 8 Bailouts, Bankruptcy, or Better? (Resolution Authority II).

Basic Framework.

The Trouble with Bailouts.

Who Will Invoke Dodd-Frank Resolution, and When?

Triggering the New Framework.

Controlling Systemic Risk.

Third Objective: Haircuts.

All Liquidation, All the Time?

Part III The Future.

Chapter 9 Essential Fixes and the New Financial Order.

What Works and What Doesn’t.

Staying Derivatives in Bankruptcy.

ISDA and Its Discontent.

Other Bankruptcy Reforms for Financial Institutions.

Plugging the Chrysler Hole in Bankruptcy.

Bankruptcy to the Rescue.

Chapter 10 An International Solution?

Basic Framework.

Problems of Cross-Border Cases.

Scholarly Silver Bullets.

Dodd-Frank’s Contribution to Cross-Border Issues.

New Living Wills.

A Simple Treaty Might Do.

Risk of a Clearinghouse Crisis.

Reinvigorating the Rule of Law.

Conclusion.

Notes.

Bibliography.

Acknowledgments.

About the Author.

Index.

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DAVID SKEEL is the S. Samuel Arsht Professor at the University of Pennsylvania Law School. He is author of Icarus in the Boardroom: The Fundamental Flaws in Corporate America and Where They Came From; Debt's Dominion: A History of Bankruptcy Law in America; and numerous articles on bankruptcy, corporate law, and other topics. His commentary has appeared in the New York Times, Wall Street Journal, Weekly Standard, Books & Culture, and elsewhere.
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