The Unfinished Agenda

Executive Summary

For the past year, more than a dozen U.S. financial regulators have scrambled to write hundreds of new rules to implement the hastily adopted Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), the most sweeping financial regulatory legislation in nearly 75 years. Implementation of the Dodd-Frank Act has exposed unaddressed weaknesses in the U.S. financial regulatory system.

We still have the same old system—only more of it. We still have an inexplicable structure with multiple federal, state, and nongovernmental regulators, which often have overlapping jurisdictions and propose conflicting regulations on similar activities, products, and services. Regulators still do not have the technology, staff expertise, or operational capacity to regulate today’s markets. Worse yet, there is no clear plan or strategy to address these fundamental problems.

In many key areas where markets operate globally, the United States has failed to reach agreement on a global approach to regulation. Further, and perhaps more troubling, foreign regulators have told us they will not follow our lead. And other significant barriers to entrepreneurial capital formation in the United States, including our litigation system, remain unaddressed. In short, the Dodd-Frank Act failed to solve many of the core problems that have eroded the stability, effectiveness, and global competitiveness of the U.S. capital markets.

For most of the 20th century, the U.S. capital markets were the envy of the world. Our financial services legal and regulatory system fostered the world’s most favorable environment for investing and accessing entrepreneurial capital. Issuers and investors alike were attracted to the U.S. markets because they understood that they would be participating in markets that were transparent, efficient, and well-regulated.

But regulators and the basic regulatory structure have failed to keep pace with changing markets. Indeed, the current U.S. foundation was put in place at a time that was closer to the Civil War than it is to today. The failure to keep pace has led to huge gaps in regulation in some areas, duplicative and conflicting layers of regulation in others, and regulators who do not have the expertise or technology to regulate modern markets. Even before the financial crisis, the U.S. Chamber of Commerce and many other organizations warned of the need for fundamental regulatory reform to ensure the long-term vibrancy and competitiveness of our domestic capital markets and our economy.

Despite all the activity in recent years, these concerns are only becoming more elevated. The problem with U.S. regulation is not its quantity, but its quality. Well-run businesses depend on wellregulated markets, and no legitimate business can compete in a marketplace that is not fair and transparent. The goal should never be less or more regulation, it should be better regulation. Our common goal must continue to be getting regulation right.