Examining Financial Reform

January 24, 2011The Hon. Gary Gensler, chairman of the U.S. Commodity Futures Trading Commission (CFTC), and former Sen. Chris Dodd (D-Conn.) anchored a high-powered lineup of guest speakers and panelists Jan. 14 at a full-day financial regulatory reform symposium at GW focusing on the impact of the historic Dodd-Frank Act.

Nearly 250 participants filled the Jack Morton Auditorium for “The Shape of Things to Come: The Financial Regulatory Landscape in the Post Dodd-Frank Era,” co-sponsored by GW’s Center for Law, Econonics & Finance (C-LEAF) and the School of Business Center for Real Estate and Urban Analysis.

Mr. Gensler kicked off the symposium with a keynote speech discussing the Dodd-Frank financial regulatory reform act, which President Barack Obama signed into law in July. The sweeping legislation, proposed by Rep. Barney Frank (D-Mass.) and Mr. Dodd in response to the recent financial crisis, will institute far-reaching reforms, increasing transparency and reducing risk in the fast-growing derivatives (swaps) marketplace.

“Markets work best when they are transparent, open and competitive,” said Mr. Gensler, who took over the reins of the CTFC in May 2009. He previously served as a senior adviser to the chairman of the U.S. Senate Banking Committee, Sen. Paul Sarbanes (D-Md.), on the Sarbanes-Oxley Act, and at the U.S. Department of the Treasury as under secretary of domestic finance and assistant secretary of financial markets.

Presenting a brief history of the derivatives market, which was largely unregulated for the past three decades, Mr. Gensler said, “The Dodd-Frank Act includes essential reforms that bring sunshine and diversity to the opaque swaps markets. Economists and policymakers have for decades recognized that market transparency benefits the public. The more transparent a marketplace is, the more liquid it is for standardized instruments, the more competitive it is, and the lower the costs for hedgers, borrowers, and, ultimately, their customers.”

“We have a long tradition at the CFTC of bringing transparency on a weekly basis to the futures marketplace,” stated Mr. Gensler, who looks forward to doing the same over the coming years in the swaps marketplace. “Congress moved forward with the historic Dodd-Frank Act…to make the swaps marketplace broader and more open,” he said. “It is our mission at the CFTC to fulfill Congress’s mandate.”

Former Sen. Dodd took the stage in the afternoon, delivering the annual Manuel F. Cohen Memorial Lecture. A member of Congress for the past 36 years, Mr. Dodd, who did not seek re-election in 2010, chaired the Senate Banking Committee at the time of the 2008 financial collapse. The author and sponsor of the Dodd-Frank Act, the nation’s most sweeping financial reform act since the Great Depression, Mr. Dodd described the two-year process of working to fix the country’s broken financial system and shared insights into the development of the signature financial reform bill that bears his name.

Much of the framework governing America’s financial system was drawn up nearly a century ago, he explained. The goal of the financial reform package was, therefore, to establish a new, improved regulatory structure reflecting the reality of 21st century financial services without overly restricting the sector.

“You want a robust financial services sector that is out there being creative, being innovative, driving growth and powering the economy,” he said. “But, at the same time, you want to make sure that the horse doesn’t run away from us. Financial regulation had simply failed to keep pace with the times.”

Mr. Dodd described a 2008 meeting with U.S. Secretary of Treasury Henry Paulson, Federal Reserve Chairman Ben Bernanke and other members of Congress, where Mr. Bernanke discussed just how tenuous the nation’s financial situation was. “All of the oxygen left the room when the chairman of the Federal Reserve told us that unless we acted within days, the entire financial system in the United States could melt down,” he recalled.

Mr. Dodd ended his speech with a call to action directed to the many law students in the room. He said that he was inspired to join the Peace Corps after attending John F. Kennedy’s presidential inauguration and urged the students to strive to “be part of something bigger” than themselves. “I hope you’ll consider committing yourselves to a life of service,” he said. “You’ll have so much fun and will make a difference.”

The daylong symposium also included panel discussions on deciphering the Dodd-Frank Act, the Central Bank’s role in reshaping U.S. banking and the economic order, financial innovation and new roles for government financial institutions.

- Jamie L. Freedman

To watch remarks from this event, follow the links below:

 


Spotlight Item: Former Senator Christopher J. Dodd (D-Conn.) at the financial regulatory reform symposium at GW.

Former Senator Christopher J. Dodd (D-Conn.) at the financial regulatory reform symposium at GW.

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