Senseless Panic. In our discussion, we talked about a number of things relating to the mortgage industry. In general, though, we kept coming back to the same basic question: has the regulation of the last decade hurt or helped the economy?
According to Bill, the original proposition by then-Sen. Chris Dodd (D-Conn.) would have been a reasonable answer to the financial crisis. It was simple and straightforward. However, changes to the original proposed legislation morphed it into the 2,500 page Dodd-Frank Act that we know today. The result has been a complicated mess of regulations that have led to more ambiguity than we've ever seen in the regulatory environment.
But, back to the original question: has Dodd-Frank worked? According to Bill, the biggest problem with Dodd-Frank is that, due to its unnecessary complexity, it has created an illusion of improvement. Sure, the economy has improved, but the regulation has probably slowed the improvement more than it needed to be. The financial system is still broken, and the overly convoluted regulatory system has created a false sense of security. We won't bother trying to fix it if we no longer think it's broken.
On the June 6 episode of my Lykken on Lending radio show, we had the opportunity to interview Bill Isaac, former chairman of the FDIC and author of the 2012 best-selling book