Securities and Exchange Commissioner Daniel Gallagher blasted the Dodd-Frank financial reform bill in a speech to the United States Chamber of Commerce Wednesday afternoon.
"It’s a perfect example of not letting a good crisis go to waste," Gallagher said. The president signed Dodd-Frank on July 21, 2010. Democrats Sen. Chris Dodd (Conn.) and Rep. Barney Frank (Mass.) have since retired from Congress.
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President Barack Obama appointed Gallagher to the SEC in 2011. He assumed office Nov. 7 after the Senate confirmed his appointment.
Gallagher noted Monday, which is Martin Luther King, Jr. day and the president’s inauguration day, is also the two-and-a-half year anniversary of the passage of Dodd-Frank. Gallagher said the bill is yet to be completed despite the length of time since its passage.
"Everybody thinks Dodd-Frank is done, Wall Street’s been reined in, July 2010—it hasn’t happened; we’re a third of the way through" the final regulations, he said.
"The act is a model of the new paradigm of legislation," he said. "A good concept, in this case regulatory reform, overwhelmed by a grab bag of wish list items."
Gallagher contrasted what the bill regulates (minerals from the Congo and oil, gas, and mining companies, for example) with what it does not (money market mutual funds, Fannie Mae, and Freddie Mac).
He said the bill "justifies its mandates as answers but only after asking the wrong questions."
Gallagher used the Volcker Rule as illustrative of his critiques of the bill, arguing it results in a great increase in regulatory rulemaking as well as misallocation of resources and opportunity costs.
"Like much of the act, the Volcker Rule is a solution in search of a problem," he said. The Volcker Rule restricts the type of investments in which banks can engage.
David Hirschmann, senior vice president at the Chamber of Commerce, introduced Gallagher as an official who knows the intricacies of regulation and can build consensus across party lines.
Dodd-Frank made some needed changes but also had some serious flaws, leading the Chamber of Commerce to develop a "fix and replace agenda," Hirschmann said.
He said the chamber views the question of regulation not as a question of more versus less but as "right way versus wrong way."
John Berlau, a finance and capital access expert at the Competitive Enterprise Institute, said Commissioner Gallagher’s remarks were an articulate expression of "the burdens of the thousands of pages of Dodd-Frank—both for its massive costs on the private sector and its diversion of the SEC from its core mission of protecting investors from fraud and scams."
Berlau noted the "amazing fact" the SEC is only a third of the way through the required Dodd-Frank regulations, but said the SEC is not at fault for its slow progress.
"That is mostly not the fault of the agencies but of the law itself that Dodd and Frank rammed through, which put forth hundreds of new rules in more than 2,500 pages with unrealistic deadlines for getting these rules implemented as well as no regard of the costs and uncertainty they would impose on a U.S. economy struggling to recover from the consequences of Dodd and Frank's previous housing interventions," Berlau wrote in an email to the Free Beacon.