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29 Yale J. on Reg. 91 (2012)
The Financial Crisis and the Path of Reform

handle is hein.journals/yjor29 and id is 93 raw text is: The Financial Crisis and the Path of Reform Michael S. Barrf In the lead-up to the financial crisis, the U.S. financial sector was over- leveraged, short-funded, risky, and opaque. Shadow banking permitted institutions to avoid comprehensive supervision and capital requirements. Innovation outpaced the ability or willingness of private- and public-sector guardians to rein in risks. An asset bubble fed the system, until the market imploded in the fall of 2008. When the crisis hit, our society found itself ill- equipped to deal with the failure of leading financial firms. In the wake of the crisis, the Obama Administration proposed a set of reforms that were eventually embodied, in large part, in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. This Essay explores the Act's key reforms: the regulation of shadow banking, the creation of a consumer financial protection agency, and the development of a resolution authority to wind down failing financial firms. The Essay also analyzes the steps that must still occur domestically and internationally to lay afirm foundation for financial stability. Introduction ..................................... .......92 I. The Origins of the Financial Crisis...........................93 II. The Major Reforms of the Dodd-Frank Act.......................97 A. Improved Management of Systemic Risk ......................97 1. Regulation of Systemically Important Financial Institutions ..................................97 2. Systemic Risk Monitoring .............. ..........99 B. Orderly Liquidation Authority ....................... 100 C. Oversight of Under-Regulated Financial Markets .... ...... 103 1. Over-the-Counter Derivatives ........... .........103 2. Repo and Other Markets ........... .........105 3. Securitization. .......................... .....106 D. A Market- Wide Regulator for Consumer Protection....................107 III. Beyond Dodd-Frank: Future Areas for Reform ............ .....108 A. Further Areas ofDomestic Reform .....................109 1. Consolidation of Financial Regulators ...............109 2. Money Market Funds... ..........................110 t Professor of Law, University of Michigan Law School. The author served as Assistant Secretary of the Treasury for Financial Institutions from 2009 to 2010, and he was a key architect of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The author would like to thank Andrew Hartlage for excellent research assistance. 91

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