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SPECIAL REPORT JULY 21, 2020 Ten Years of Dodd-Frank and Financial Reform OBAMA’S SUCCESSES, TRUMP’S ROLLBACKS and FUTURE CHALLENGES - II - Table of Contents INTRODUCTION .......................................................................................... 1 Dodd-Frank is Important and Relevant to Today’s Social Upheaval ...........................1 The Dangerous Deregulation of the Financial Industry ............................................2 Financialization .................................................................................................... 5 The 2008 Crash and its Costs 6 Re-regulating the Financial Industry: The Dodd-Frank Act and the Obama Administration .............................................................................. 9 The Trump Administration Adopts Wall Street’s Deregulation Agenda .....................10 No Evil Required: Just the Siren Song of Market and Competitive Pressures...........13 THE DODD-FRANK ACT ..........................................................................15 The Dodd-Frank Act was a Bipartisan Bill that Resulted from an Unprecedented Open and Public Process ...............................................15 Dodd-Frank Act Goals .........................................................................................18 Key Components of the Dodd-Frank Act ...............................................................19 Prudential Regulation ..................................................................................19 Establishment of CFPB to Protect Financial Consumers from Predators ...........21 Creating FSOC to Address Systemic Risk and Shadow Banking System............22 Volcker Rule to Address Proprietary Trading by Banks .....................................22 Reform Securities Markets to Increase Investor Protection ..............................24 Derivatives Regulation ..................................................................................26 The Dodd-Frank Act Delegated to Regulatory Agencies .........................................28 THE DODD-FRANK ACT UNDER THE OBAMA ADMINISTRATION .....29 Prudential Bank Regulation .................................................................................29 Capital, Liquidity and Leverage Standards, Including Enhanced Prudential Standards for Megabanks ...........................................................29 Stress Tests ..................................................................................................31 Resolution Plans, aka “Living Wills” ..............................................................31 Orderly Liquidation Authority .........................................................................32 Volcker Rule .......................................................................................................32 Consumer Protection ..........................................................................................33 Investor Protection ..............................................................................................34 Investment Advice ........................................................................................34 Credit Risk Retention ....................................................................................35 Whistleblower Programs ................................................................................35 Derivatives .........................................................................................................36 Derivatives Market Structure Improvements and Trading and Clearing Requirements .........................................................................36 Margin for Uncleared Swaps ..........................................................................37 Swap Dealer Business Conduct Standards ......................................................38 - i - Cross-Border Activity .....................................................................................39 Addressing Systemic Risk ...................................................................................40 Entity Designations—MetLife, AIG, Prudential, GE Capital ..............................40 Activity Designations—Recommended More Robust Money Market Fund Regulations to SEC .....................................................................................41 Office of Financial Research ..........................................................................41 The Obama Administration’s Unfinished Agenda ..................................................42 Speculative Position Limits ...........................................................................42 Executive Compensation ...............................................................................42 Credit Rating Agencies ..................................................................................42 THE DODD-FRANK ACT UNDER THE TRUMP ADMINISTRATION ....44 The Treasury Department’s Review of Regulations Was a Roadmap for Widespread Deregulation ................................................................................44 Prudential Standards ..........................................................................................48 Capital and Liquidity Requirements ...............................................................48 Undermining the Credibility of Stress Testing .................................................49 Reduction of Living Will Requirements ..........................................................49 Volcker Rule .......................................................................................................50 Changing the CFPB from Consumer Protection to Predator Protection .........................................................................................51 Undermining Investor Protection .........................................................................53 Finalizing a Flawed Regulation Best Interest ..................................................53 Threatening Whistleblower Protections ...........................................................54 Undermining Derivatives Reforms ........................................................................54 Proposal to Overhaul SEF Regime ..................................................................54 Reducing Margin Requirements.....................................................................54 Proposed Weak Cross-Border Rules ................................................................55 Gutting the Financial Stability Oversight Counsel ..................................................56 Abandoning Entity-Designation Authority .......................................................56 Abandoning Activity-Designation ..................................................................58 De Facto Killing the Office of Financial Research ..........................................58 WHAT’S NEXT FOR FINANCIAL REFORM, INCLUDING BEYOND THE DODD-FRANK ACT? ................................59 Reversing Dangerous Trump-Era Deregulation ......................................................59 Finishing the Unfinished Obama-Era Business .....................................................60 Financial Reform Beyond the Dodd-Frank Act ......................................................60 CONCLUSION ..............................................................................................67 APPENDIX: Republican-Sponsored Amendments to S. 3217 Adopted by the Senate ...............................................................................................68 Citations ....................................................................................................................71 - 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