by Norbert J. Michel
The Heritage Foundation
May 06, 2014
The 2010 Dodd-Frank Act greatly expanded the federal government’s reach into financial markets. In particular, the creation of the Financial Stability Oversight Council (FSOC) leaves the Federal Reserve poised to regulate nonbank sectors of financial markets more extensively than ever before. The FSOC is supposed to increase U.S. financial stability, but in practice it will lower competition, increase concentration risks, and cost consumers money. These regulations also increase the likelihood of future taxpayer bailouts for even more nonbanking financial firms. The FSOC’s existence has enshrined and expanded—not eliminated—the too-big-to-fail doctrine. The mere existence of the FSOC is wholly incompatible with the functioning of a dynamic private capital market. Going forward, Congress’s best course of action remains repealing the Dodd-Frank Act. Until a full repeal is politically possible, Congress should focus on repealing Title I and Title II of Dodd-Frank or, at the very least, eliminating the FSOC.

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