Answer to Question #17315 in Management for Leigh Lane

Question #17315
2.Evaluate whether the Dodd-Frank legislation can prevent a financial crisis in the future. Provide your rationale
Expert's answer
We can think of our financial system in 2010 as a damaged building, post-earthquake. The Dodd-Frank Act represents the view that the foundation of the building should remain in place. It accepts the pre-crisis financial structure as sound, and implies that we just need some regulatory changes to better anticipate and better respond to the next crisis when it arrives. Dodd-Frank does not call for a rebuilding of our financial system, but protects and strengthens the pre-crisis financial order. The acceptance of "Too Big to Fail" and the influence of large incumbent firms essentially guarantee that this act, like all financial reform efforts before it, will do little to prevent the next financial crisis.

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