Politics of Regulatory Reform: The Enactment of Dodd-Frank

• In Event: 261 - Section on Political Sociology Refereed Roundtable Session and Business Meeting
  In Refereed Roundtable 60min: Table 05. Policy Determinants and Outcomes

Abstract

This article examines the political battle that surrounded the enactment of the Dodd-Frank Act.

Regulatory reform became a political necessity in the aftermath of the 2008 financial crisis. In 2010, the US Congress passed the Dodd-Frank Act, which brought about a number of important policy changes including the creation of the Consumer Financial Protection Bureau (CFPB). The road to the enactment of Dodd-Frank was a bumpy one, however, and until fairly late in the process, the idea of establishing a new federal agency dedicated to consumer financial protection was not met with enthusiasm by the members of the Congress (except for some liberal members of the Democratic party). It was resented by the Republican members who thought the establishment of a centralized federal agency would be a political victory for the supporters of “big government”; financial institutions, particularly big banks, extensively lobbied against it, and a large part of the Democratic members saw it as a political cul-de-sac.

I examine the different ways in which regulatory failures regarding consumer protection were problematized in the aftermath of the crisis, and attempt to explain how it is that a federal agency, not a popular cause at the outset of the crisis ended up being the central piece of a bill that was created to fight with a financialized economy run amok.

Author

• Basak Kus, Wesleyan University