After the massive financial meltdown in 2008, Congress passed and President Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act in July 2010.
Nearly two years later, policy makers and regulators continue to haggle over how best to implement the 849-page law. Whether it is ever implemented -- or even survives -- hinges on this fall's presidential election.
There are few areas of policy where the two candidates stand in such stark contrast, at least rhetorically.
Republican presidential contender Mitt Romney's official Plan for Jobs and Economic Growth says that he "will seek to repeal Dodd-Frank and replace it with a streamlined regulatory framework." In Ohio, in March, he described the kind of financial regulation he could support.
"When I get rid of Obamacare and I get rid of Dodd-Frank and I get rid of Sarbanes-Oxley, it doesn't mean I don't want to have any law or any regulation," Romney said. "It means I want to make sure it's modern, it's updated, it goes after the bad guys, but it also encourages the good guys."
Sarbanes-Oxley was passed in 2003 to tighten the internal controls of companies in the wake of the WorldCom and Enron accounting fraud scandals.
Romney agrees with critics who say much of Sarbanes-Oxley and Dodd-Frank is unnecessary regulatory overreach. They say the rules add to business expenses through costly paperwork compliance requirements and complex new rules.
Nonetheless, his official campaign blueprint says some of the "concepts" in Dodd-Frank have merit, including increased transparency for inter-bank relationships, enhanced capital requirements and rules to deal with "new forms of complex financial transactions."
Obama insists Dodd-Frank would prevent a return to the unfair practices of deregulated markets that contributed to untold suffering. On the campaign trail, he touts the bill's protections as one of his proudest legislative achievements. And in his State of the Union address in January, Obama made it clear maintaining those protections is a high priority.
"I will oppose any effort to return to the very same policies that brought on this economic crisis in the first place," he said.
But some supporters of robust financial reform say both Obama and Romney remain beholden to big banks. Campaign contributions indicate Wall Street's masters of the universe will be heard loud and clear in either an Obama or Romney Oval Office.
Others point to Obama's willingness to scale back some of Sarbanes-Oxley's investor protections in the recently signed JOBS Act as proof of his continuing Wall Street loyalties.
Obama hailed the JOBS Act, which rolls back certain investor disclosures for what the bill calls "emerging growth companies" with less than $1 billion in revenues, as a bipartisan victory for entrepreneurs seeking capital.
Others aren't so sure. Eliot Spitzer, the former Democratic governor of New York who wrung a painful settlement from Wall Street traders when he was that state's attorney general, said in a column in the online magazine Slate that the JOBS Act "will undo some of the most important reforms placed on Wall Street in a generation."
Barbara Roper, director of investor protection at the Consumer Federation of America, noted Obama's JOBS Act retreat affects "virtually all new companies – everybody but Facebook. Even Google had less than $1 billion in revenue when it went public."
Roper is discouraged that the president seems to be "pandering" with the bill.
"Why a Democratic president thinks it's a good idea to buy into Republican rhetoric about ‘job-killing regulation' is beyond me," she said.
Nonetheless, there is a "notable difference" between the two parties' approach, she said, with Republican candidates during this year's debates all "in a race to see who could go furthest in disavowing financial reform."
Obama's recess appointment of Richard Cordray to lead the Consumer Financial Protection Bureau created by Dodd-Frank has been seen by some consumer advocates as evidence that he is serious about the agency and wanted to give it "teeth."
In addition, recently reported figures on financial fraud investigations show the Obama Justice Department has gotten the message the public is fed up. For the year ending Sept. 30, securities and commodities fraud investigations are up 52 percent since 2008, with more than 1,800 pending, according to the FBI. ( http://www.fbi.gov/stats-services/publications/financial-crimes-report-2010-2011 )
Obama also signed the 2009 Credit CARD Act that now requires disclosure of how long it would take to pay off credit card debt if paid only by minimum monthly payments, another reform the companies fought and would like to see repealed. Romney, who spent years at the private equity
firm Bain Capital, buying and selling companies, would rely on markets to largely regulate themselves. During the primaries, he told a Nevada audience that he opposed efforts to stop housing foreclosures, counseling, "Let it run its course and hit bottom."
He has since taken what conservative American Enterprise Institute blogger James Pethokoulis calls "populist positions" on financial issues – for example, favoring cutting capital gains but only for middle-income taxpayers. Pethokoulis says these ideas "counterbalance the plutocrat, Gordon Gekko caricature" his opponents want to promote.
As the country eventually comes to terms with the foreclosure crisis, high-interest personal credit card debt and the insecurity of its long term nest eggs in 401(k)s, some experts suggest financial regulation based on behavioral research is in order. Critics contend that's a "nanny state" approach.
Professor Michael S. Barr of the University of Michigan Law School, author of the just published "No Slack: The Financial Lives of Low-Income Americans" and a former Obama Treasury official, said in an interview that regulations should be based on "how people actually think and behave as opposed to some policy makers' abstract model about how that occurs."
"No Slack" suggests that disclosures of conflicts of interest by mortgage brokers, who can make more money depending on how a loan is structured, or such time-honored practices as putting pre-payment penalties or balloon payments in short-term adjustable-rate mortgages, should be subject to stricter regulation. That's because those agreeing in writing to their terms may not understand them.
In a sense, he suggests fairness may require protecting consumers from what they think they want but can't in fact afford.
"(D)isclosures of potential conflicts of interest may paradoxically increase consumer trust," Barr warns.
(Bartholomew Sullivan is coordinating political coverage of the presidential election campaigns for the Scripps Howard News Service in Washington. Contact him at SullivanB@SHNS.com .)