The expected announcement today by Senate Banking Committee Chairman Tim Johnson (D-S.D.) that he will not run for re-election is a poignant symbol of just how entrenched the Dodd-Frank Act has become.
It also showcases the shift of the regulatory spotlight from Congress to the Securities and Exchange Commission, the Commodity Futures Trading Commission and their banking brethren.
When Johnson leaves office in January 2015, there will have been at least two new chairmen of the Senate Banking and the House Financial Services committees since the namesakes of Dodd-Frank, former Sen. Chris Dodd and former Congressman Barney Frank, left in the same way after spending two years creating the biggest overhaul of the nation’s financial regulatory system since the Great Depression.
Also, when Johnson goes, it will have been nearly five years since Dodd-Frank became law. The longer laws and agencies (such as the Dodd-Frank-created Consumer Financial Protection Bureau) are around, the less likely it is for opponents to repeal their existence.
Republicans still file perfunctory bills to gut all and parts of Dodd-Frank, but investment advisory companies and other financial services firms are showing less hunger for repeal as they made the law an embedded part of their computer systems and employee training long ago.
The most virulent and efficacious attacks on the law are assaults on the SEC’s and CFTC’s ability to enforce them.
Repealing a law takes considerably more votes and political clout than reigning in an agency’s budget. The poster child for this point is the CFTC, which is in its first year of overseeing the swaps market with less money than it had before its 2012 mandate took effect.
The swaps market is seven times the size of the futures market that has been the CFTC’s traditional domain.
Both the SEC and CFTC are trying to keep staff reductions at a minimum by slashing technology spending. But in an increasingly computerized marketplace, the cost cutting could lead to the types of calamities Dodd-Frank was enacted to prevent.