Experts Analyze Recent Financial Reform Legislation

At this year’s Reunion celebration, graduates working in finance discussed the shortfalls of the Dodd-Frank Wall Street Reform and Consumer Protection Act

Fall 2011

This June, Reunion 2011 provided an opportunity for alumni to reminisce about their days at Columbia Law School, as well as to participate in and attend several conversations covering headline-grabbing legal topics. Professor John C. Coffee Jr. moderated an event that brought together expert graduates to discuss the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The panel discussion included former SEC Commissioner Annette Nazareth ’81, Hong Kong Exchanges and Clearing Limited CEO Charles X. Li ’91, and renowned bankruptcy attorney Harvey Miller ’59. Ultimately, the finance professionals concluded that the financial reform act has failed to eliminate the risk of banks becoming “too big to fail.” Miller, a partner at Weil, Gotshal & Manges known recently for structuring the Lehman Brothers bankruptcy settlement, explained that the statute was a total failure by that measure.

“The concept the statute adopts is that by oversight and regulation you’ll be able to stop this problem of systemic risk by nipping it in the bud,” Miller said. “That requires the will to regulate. And, yet, when you look at what happened leading up to 2008, you find that there was a total lack of will to regulate.”

Nazareth, a partner at Davis Polk in Washington, D.C., added that regulators also face substantial difficulties enforcing the legislation. “We’re talking [about] very sensitive, prudential regulation that’s going to have to take into account that firms vary a lot, [and] have different management structures,” she said. In addition, Nazareth noted, companies are going to great lengths to escape regulation by the Financial Stability Oversight Council. The council determines which firms are large enough to pose a systemic risk to the economy and, as a result, must be subject to more strict regulation.

“We are essentially coming to the conclusion,” Li explained, “that institutions are still too big to fail, and Dodd-Frank is too big to work.”