How to Improve the Financial-Reform Law?

"Now that the Dodd-Frank financial-reform bill has become law, the real battle begins. Despite the law’s 2,000 pages—or possibly because of them—there is much ambiguity about what its eventual impact will be. The Wall Street Reform and Consumer Protection Act, as the law is officially known, grants the Federal Reserve enormous regulatory power. The Fed can now unilaterally decide that any financial institution is “systemically important”—meaning that its failure could destabilize the financial system itself—and impose any sort of regulation on it, such as requiring that it hold more equity capital, limiting the amount of short-term debt it can issue, forcing it to write up a living will, and so on. [...] There is a better alternative. The Federal Reserve can announce what minimum conditions firms must meet to avoid being designated as systemically important. Each firm can then decide whether to meet those conditions or face federal regulation. And basic principles of economics can tell us what these minimum conditions should be". Read the complete article in the City Journal here.