Managing to the New Regulatory Reality Doing Business Under the Dodd-Frank Act

by Wilson, Gregory P.; Davis, Richard K.

• ISBN13: 9780470874394
• ISBN10: 0470874392
• Edition: 1st
• Format: Hardcover
• Copyright: 2011-02-11
• Publisher: Wiley

Summary

In Managing to the New Regulatory Reality, author Gregory Wilson provides important lessons for private sector management, specifically financial services firms, as well as lessons for policymakers, regulators, and our political economy that will shed light on how we go from bubble to crisis, regulatory reform, and economic readjustment. Broken down into four parts, this book briefly reviews the causes of the 2008 financial crisis (market, regulatory, and international failures) and assesses their impact on multiple stakeholders; describes and analyzes the impact of the immediate policy and regulatory reactions on financial institutions that the crisis response triggered (in 2008, primarily U.S., but also G20); explains the legislative policy and process response, and then describes the resulting new regulatory reality for managers of financial institutions (evolving from the Obama Administration proposals through the Congress, but also including new G20 global standards, all of which should be enacted by 1Q2010); and finally concludes with an assessment of the new regulatory reality as well as the new U.S. and G20 regime that will govern financial institutions risk management and competitive behavior for the foreseeable future.

Author Biography

Gregory P. Wilson is the founder of his own consulting firm specializing in financial policy and regulatory issues and is a former part-ner in McKinsey & Company's Washington, D.C., office. Prior to joining McKinsey, during the U.S. savings and loan crisis, he served as the deputy assistant secretary for financial institutions policy at the U.S. Treasury Department, where he received the Secretary's Distinguished Service Award. For more information, visit www.gregwilsonconsulting.com.

Table of Contents

Foreword	p. xiii
List of Acronyms	p. xv
Preface	p. xvii
Understanding the Immediate Political Reactions	p. 1
Immediate U.S. Reaction: The Emergency Economic Stabilization Act of 2008	p. 3
All Roads Ultimately Lead to Congress	p. 3
How a Crisis Bill Becomes an Emergency Law	p. 6
EESA's Major Provisions	p. 13
Conclusion	p. 15
Rise of the G20-A Global Call to Action	p. 17
A New International Financial Order	p. 17
Toward a Balanced Approach	p. 20
Conclusions	p. 22
The Beginnings of the New Regulatory Reality	p. 25
Democracy Can Act Swiftly in a Crisis	p. 26
Problems at a Small Minority of Firms Create Lasting Industry Problems	p. 26
Populist Anger Drives Unintended Consequences	p. 28
When Governments Intervene to Protect Taxpayers, Strings Are Attached	p. 30
Crises Have Long Political and Regulatory Tails	p. 30
Safety Valves Don't Always Work as Expected	p. 31
International Crises Command Global Responses	p. 33
Conclusions	p. 34
Understanding U.S. and G20 Regulatory Reforms	p. 37
The U.S. Legislative Process	p. 41
Administration Proposal	p. 42
House Consideration	p. 42
Senate Consideration	p. 50
Conference Consideration	p. 58
Conclusions	p. 66
The Dodd-Frank Act of 2010	p. 69
New Regulatory Architecture	p. 70
New Regulatory Standards	p. 88
New Operating Restrictions	p. 96
Higher Regulatory Costs	p. 105
Conclusions	p. 107
Beyond the United States-Current G20 Efforts	p. 111
G20 Agenda Going Forward	p. 112
IMF Review of U.S. Financial Sector Assessment Program, 2010	p. 116
The Seoul Action Plan	p. 117
Conclusions	p. 119
Preparedness: 10 Lessons for Winning in the New Regulatory Reality	p. 121
Set the Right Leadership Tone at the Top	p. 127
Background	p. 127
Corporate Leadership	p. 128
Leadership in Society	p. 133
Leadership on Public Policy	p. 136
Implications	p. 144
Tell a Good Story	p. 147
Background	p. 148
What Individual Firms Can Do	p. 149
What the Industry Must Do	p. 155
Implications	p. 161
Be Politically Adept, Not Tone Deaf	p. 163
Background	p. 164
New Legislative Mandates for Executive Compensation Limits	p. 164
Consumer Protection	p. 174
Implications	p. 179
Advocate Constructively for Better Outcomes	p. 181
Background	p. 182
No Shortage of Future Policy Debates	p. 183
The Importance of Balanced Policy Objectives	p. 185
Re-Engaging Public Policy	p. 188
Broader Issues: Getting Back to Competitiveness	p. 195
Implications	p. 197
Manage Strategy and Regulatory Risks Together	p. 205
Background	p. 205
Strategy and Regulatory Risks after the Dodd-Frank Act	p. 208
Implications	p. 212
Maintain Fortress Strength at All Times	p. 213
Background	p. 214
New Basel III Requirements	p. 215
New Capital and Liquidity Requirements in the Dodd-Frank Act	p. 220
Implications	p. 227
Live Good Governance	p. 231
Background	p. 232
The Value of Good Governance	p. 233
Recent Regulatory Efforts to Improve Corporate Governance	p. 234
IIF Principles	p. 243
Implications	p. 243
Plan Carefully for Contingencies	p. 247
Background	p. 248
U.S. Rapid Resolution Plans	p. 252
Implications	p. 256
Engage Regulators on Warning Signs	p. 263
Background	p. 264
Making Sense of Crisis Warning Signs	p. 265
The New Official U.S. Role in Identifying Financial Crises	p. 274
An Industry Action Plan on Early Crisis Detection	p. 276
Implications	p. 280
Build Trust-Based Supervisory Relationships	p. 283
Background	p. 284
Building Trust-Based Supervisory Relationships	p. 285
Improve Supervisory Relationships to Avoid Negative Regulatory Consequences	p. 295
Implications	p. 300
Conclusion-Be Prepared!	p. 303
Implications for Financial Companies	p. 303
Implications for the Financial Services Industry	p. 306
Notes	p. 311
Additional Resources	p. 329
Acknowledgments	p. 331
About the Author	p. 335
Index	p. 337
Table of Contents provided by Ingram. All Rights Reserved.