Failure of the Dodd-Frank Act
Michael I.C. Nwogugu
Independent Researcher, Newark, New Jersey, USA
Purpose – This paper aims to explain the weaknesses and inconsistencies inherent in the Dodd-Frank
Act of 2010 (USA).
Design/methodology/approach – The approach is entirely theoretical and multi-disciplinary (and
relies on some third-party empirical research), and it consists of a literature review, critique and the
development of theories which are applicable across countries.
Findings – The Dodd-Frank Act is inefcient and inadequate as a response to the global nancial
crisis. The Dodd-Frank Act has not resulted in signicant economic growth and has increased
transaction costs and compliance costs for both government agencies and nancial services companies.
Originality/value – The author developed the theories introduced in the paper.
Keywords Global nancial crisis, Dodd-Frank Act, Financial regulation
Paper type Research paper
In July 2010, the US Congress enacted the Restoring American Financial Stability Act of
2010 (“RAFSA” or the “Dodd-Frank Act”), which consists of several individual
distinct statutes. RAFSA substantially changes the nature and effects of federalism and
preemption in the USA – RAFSA grants more powers to the federal government to
regulate more nancial services, but because the statute leaves critical details up to the
US Securities and Exchange Commission (SEC) and the US Federal Reserve System,
sections of RAFSA may be challenged in court on constitutional grounds as void for
RAFSA has affected and is likely to continue to affect legislation and adjudication in
many countries because many such countries’ constitutions are based on the US
Constitution (and were either enacted or amended within the past 20 years). RAFSA
may also be relevant to Commonwealth Countries because like the USA, their legal
systems and constitutional principles are based on the British legal system. The
governments and citizens of the United Kingdom, Canada, India and other
Commonwealth countries have signicant investments in the USA, and US commercial
and investment banks (which are subject to RAFSA) are very active in the UK capital
markets and in many Commonwealth countries. The shares of many companies based
in Commonwealth countries are listed in the USA. The global nancial crisis of
2007-2014 affected many Commonwealth Countries (like the United Kingdom, India,
Canada, Australia, etc.).
According to Polk (2013b), as of the beginning of July 2013, 279 RAFSA rule-making
requirement deadlines had passed. Of these 279 passed deadlines, 175 (62.7 per cent)
have been missed and 104 (37.3 per cent) have been met with nalized rules. In addition,
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Journalof Financial Crime
Vol.22 No. 4, 2015
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