Trade the Congressional Effect: How To Profit from Congress's Impact on the Stock Market

Dodd-Frank Overview

While much of current political debate focuses on the potential impact of the new health care law (which will likely be still debated many years from now), I believe that Dodd-Frank represents a scale of government oversight and intervention that is in fact unprecedented and completely unmanageable. While it is possible to look at discrete sections of the law and imagine them somehow constitutional, I do not find it possible to comprehend how Dodd-Frank can contribute positively to grow the economy. The law is 2,319 pages, and I am sure that two years after its passage its full impact is still not understood by Wall Street, the managements of the banks, and most especially, by the regulators. One thing is certain: it has helped to depress bank stocks more than other sectors.

In law, if you have an agreement to agree, but do not actually agree, generally speaking you do not have a contract. SarbOx did the damage it did to the capital markets and our employment prospects with only 16 regulations. Dodd-Frank has 243 separate regulations. It is so vast in its rule-making authority that it is best thought of as the regulatory equivalent of an endless agreement to agree. Nothing is in stone yet, and the regulators can play gotcha with the banks all day long. In turn, the banks will have their profitable businesses mostly curtailed; they will suffer enormous new regulatory burdens and become much more like utilities over time. I am told in actual practice at the large ...