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Abstract

This Essay examines the key strengths and limitations of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the US. financial reform legislation written in the aftermath of the 2008 financial crisis under considerable political pressure. The legislation's strengths include an emphasis on stress testing, the creation of the Office of Financial Research, and a focus on the regulation of the largest nonbank financial institutions. The Act, however, does have several weaknesses. The legislation neither solves the regulatory arbitrage problem, nor simplifies supervision, by increasing-not decreasing-the number of regulators. It does not go nearly far enough in terms of regulatory requirements for nonbanks. The legislation is overly complex and uneven, resulting in weak to nonexistent supervision of certain activities and excessive regulation of others. Also problematic is that the legislation neither advances the quality of supervision and educational opportunities for supervisors, nor provides sufficient governance when the application of regulation becomes arbitrary. This Essay offers reforms to help repair the Act's shortcomings, including strengthening the business and audit lines of defense, creating more formal academic supervisory education programs for supervisors, and instituting more effective ombudsman programs within regulatory agencies.

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