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13 of 13 people found the following review helpful
5.0 out of 5 stars Insightful and comprehensive, December 8, 2010
This review is from: Regulating Wall Street: The Dodd-Frank Act and the New Architecture of Global Finance (Hardcover)
The Dodd Frank act brings about fundamental structural changes to the economy with far reaching implications for financial institutions, consumers, and regulatory bodies to name a few. While there have been many articles and white papers that dissect the issues related to the act in isolation, "Regulating Wall Street" is a comprehensive view of the act, going through Dodd-Frank's finer points in great detail, and provides an impartial analysis of its possible implications with insights into the how market and regulatory environments in the future may look like.

This book is a wonderful resource for any financial student and professional as it takes a step back to reflect on the history of regulation and explores the repercussions that arose from these regulations. The ex-post analysis of how the act would have performed during the financial crisis is worthwhile and the drawbacks of factor-based capital charges where the factors are based on historical experience are well-highlighted and points to ponder. Similarly, questions that pertain to the future of the Federal Reserve System are timely as the current discussions in the government will attest.

The book does well to compare Dodd Frank to other regulatory regimes in terms of managing systemic risk and offers new ways to assess and charge for the systemic risk that financial institutions create using prospective views of risk as opposed to static factor based charges. The proposals for taxing systemic risk makes sense in that that if a firm creates a disproportional amount of systematic risk and hence acts as a negative externality to the economy in general, it makes sense to tax the firm proportional to the risk it creates. It is an interesting proposal if it can overcome practical challenges in a formal implementation.

The implications of the reform of the Over-the-Counter (OTC) derivatives and their significance is given due credit in the book as it examines the effect of these reforms on hedging instruments in detail. Some very interesting options to incentivize transparency are discussed and a striking feature of the book is that throughout the book, it weaves well-thought out academic research, a historical perspective and future implications while discussing the key aspects of the bill.

The best part of the book was the discussion of the white elephants in the economy that the act missed and the risks that may still be lingering in the system because of these omissions including how an insurance company, AIG found itself in the center of the crises, and of course, the two F words Fannie Mae and Freddie Mac.

Overall, the book is a culmination of perceptive analysis and well-thought out recommendations from the faculty at NYU and is a must-have for the finance practitioner with neither time nor the legal expertise to skim through 2,319 pages of the Dodd Frank act.
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