Before the ink was even dry on the Dodd-Frank Wall Street reform law, the financial industry predicted impending doom for the financial sector—and, by extension, the real economy—from the stronger equity buffers and tough new limits on high-risk financial trading mandated by the law.
Ever since, we have heard the steady drumbeat of industry fears that trading costs would spike, the costs of financing real economy businesses would rise, and a “liquidity crisis” would erupt. Are they right? Does tough financial reform strengthen markets and boost the real economy? The answer is finally in, and Paul Volcker was right again.
The above excerpt was originally published in Morning Consult. Click here to view the full article.