THE CRASH OF 2007 / 2008 hit Harvard University especially hard. Thanks to the overweeningly brilliant, unflappably self-confident financial guidance of ex-president Lawrence Summers, Harvard lost nearly a third of its $36 billion endowment in one year. ("As a former Secretary of the Treasury, I assure you that interest rates will not fall below X," he is rumored to have told the governing board, who were anxious about a particularly daring credit-default swap he was proposing.) Every department's belt was tightened several notches, and widespread layoffs were anticipated.
The talk was grim around my office, the building-services center of a large research complex at Harvard. Contractors came by frequently for keys and instructions, and the more gregarious ones often stayed to schmooze. Sports and celebrities, our usual topics, were replaced that year by political griping. As the details of the bank bailout emerged, imprecations were fervently heaped on both bankers and politicians; a respectful hearing was even accorded the office radical (me), usually humored or ignored. But these conversations always ended the same way. One or another of those tough, no-bullshit, can-do guys would shrug: “Hey, what can we do about it? Nothin’.” And the rest would chorus: “Yeah, what can ya do?” It was an epitome of twenty-first century American democracy: people used to coping with dauntingly complex mechanical systems simply took their political impotence for granted.
Their fatalism was entirely appropriate. As we sat around the office grumbling, Congress began responding to nationwide calls for financial reform. The two-year process that resulted in the Wall Street Reform and Consumer Protection Act of 2010, known as “Dodd-Frank,” bestowed on the still-battered nation what the (as ever) smilingly earnest President Barack Obama called “the strongest consumer financial protections in history.” He paused for emphasis and repeated to his enthusiastic audience, “in history.”
Another two years on, the invaluable investigative reporter Matt Taibbi has written a lengthy obsequy for Dodd-Frank.
Dodd-Frank is groaning on its deathbed. The giant reform bill turned out to be like the fish reeled in by Hemingway’s Old Man — no sooner caught than set upon by sharks that strip it to nothing long before it ever reaches the shore. In a furious below-the-radar effort at gutting the law … a troop of water-carrying Eric Cantor Republicans are speeding nine separate bills through the House, all designed to roll back the few genuinely toothy portions left in Dodd-Frank. With the covert assistance of quisling Democrats, both in Congress and in the White House, those bills could pass through the House and Senate with little or no debate, with simple floor votes. …
The fate of Dodd-Frank over the past two years is an object lesson in the government’s inability to institute even the simplest and most obvious reforms. … From the moment it was signed into law, lobbyists and lawyers have fought regulators over every line in the rulemaking process. Congressmen and presidents may be able to get a law passed once in a while — but they can no longer make sure it stays passed. You win the modern financial-regulation game by filing the most motions, attending the most hearings, giving the most money to the most pol...