Bradley on Krawiec on Dodd Frank on Jotwell

Caroline Bradley of the University of Miami School of Law (who also blogs at blenderlaw) has just posted a discussion of Kim Krawiec's "Don’t 'Screw Joe the Plummer': The Sausage-Making of Financial Reform"  at jotwell.  Bradley begins her discussion:

Much recent scholarship on financial regulatory reform since the global financial crisis critiques the substance of new standards and rules. For this paper ... Kimberly Krawiec chose to examine the process which produces rules of financial regulation (this is the sausage-making of the paper’s title). The current administration, like governments of other countries, has emphasized the importance of transparency and open government and of opening up decision-making to citizen participation, so an academic study like this paper, which examines citizen participation in rule-making, is timely and important.

The paper’s case study is of the Volcker rule, which restricts proprietary trading and ownership interests in hedge funds and private equity funds by banking entities. Professor Krawiec chose to focus on the Volcker rule because it “had the potential to illuminate questions of whose voice gets heard on a major issue of financial reform as the sausage is really getting made.”  The Dodd-Frank Act left significant discretion to regulators with respect to the details of this rule (and others): key terms and the contours of the exceptions to the bans are not clearly defined. Professor Krawiec explains that the exceptions were a necessary component of a compromise between those who thought that Dodd-Frank should do more to rein in large financial institutions and those who were sympathetic to complaints from financial institutions.  She also points out that much of the trading the Volcker rule explicitly permits shares objective characteristics with proprietary trading, such that the motive for the trading is the distinguishing characteristic.

Read the rest of her analysis here.  You may recall that Kim blogged about the reseach on this last fall here.  And the Huffington Post discussed the paper here.