SEC's Gallagher Rips Dodd-Frank on Five-Year Anniversary

Aug 5 2015 | 1:12pm ET

Outgoing Securities & Exchange Commissioner Daniel Gallagher gave a speech to the U.S. Chamber of Commerce yesterday that took the infamous Dodd-Frank Wall Street and Consumer Protection Act to task.

The act, which was passed in the wake of the 2008-2009 global financial crisis, has been characterized by many on Wall Street as classic regulatory over-reach.

In his speech, Gallagher slammed Dodd Frank as having backfired, “strangling our economy, increasing the fragility of the financial system, and politicizing our independent financial regulators.”

Worse, Gallagher said, is how the SEC has become a tool for policy implementation instead of regulatory enforcement as a result of the Act. "The SEC became the implementing tool for the long pent-up dreams of liberal policymakers and special interest groups,” he said, reminding the audience that Dodd-Frank remains the only piece of major securities legislation in U.S. history passed by Congress without bipartisan support.

Gallagher also lambasted the Financial Stability Oversight Counsel (FSOC) as “a poor construct for monitoring and addressing potential systemic risk,” while describing the Financial Stability Board (FSB) as “an even more dangerous charade” that includes only three securities regulators on a 35-person steering board which includes representatives from the ECB, several European central bankers and the Basel Committee. “This has allowed the Europeans — for whom capital markets are much less important than the United States — and their pro-prudential regulatory cohorts in the United States to relegate their capital markets counterparts to the kids table out in the hall,” Gallagher said. 

Gallagher was friendlier to the SEC’s Investment Management Division, which he noted has “made great strides in recent years, shepherding a nuanced money market fund rule to adoption and announcing a suite of rulemaking initiatives aimed at gathering better and more useful data in the fund space.”

He also singled out the SEC’s Enforcement division for compliments, stating that the unit has “done an admirable job in the wake of the financial crisis, resisting calls to storm Wall Street with torches and pitchforks while still addressing the miscreants, both large and small, corporate and individual, that plague our capital markets.”

Gallagher questioned why the SEC’s Division of Trading and Markets, the area with which he is most familiar, does not have regulatory authority over the markets for treasuries and over municipal debt issuers, given their overwhelming importance to the capital markets. He also reiterated the long-held belief among investors that the Commission review SIPC and SIPA.

Gallagher announced his resignation from the SEC in May, but agreed to remain aboard the five-member Commission until his successor was named. 

His full speech here can be accessed here. 


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