The narrative that emerged in the aftermath of the COVID-19 financial crisis has focused on nonbank financial intermediation as the primary vulnerability that plagued financial markets starting in March of 2020 and the exogenous nature of a public health crisis as a unique precipitating event. As a result, the crisis has largely been viewed as vindication for financial regulation as it applies to banks, with the Federal Reserve playing the role of heroic rescuer of the financial system.
This Article offers an alternative-and critical-analysis of the performance of banks during the COVID-19 financial crisis and the Fed's role as a financial regulator. Charting the course from the landmark reforms of the Dodd-Frank Wall Street Reform and Consumer Protection Act to the COVID-19 crisis reveals disconnects between the legal and policy objectives of financial regulation and the actions taken by policymakers. Rather than completing the implementation of Dodd- Frank and addressing known sources of financial fragility, the Fed pivoted to a focus on "tailoring" regulations for the largest bank holding companies. Tailoring resulted in a banking system that was unable to respond effectively to the financial market disruptions imposed by the COVID-19 pandemic, necessitating unprecedented fiscal and monetary support.
Graham S. Steele,
The Tailors of Wall Street,
U. Colo. L. Rev.
Available at: https://scholar.law.colorado.edu/lawreview/vol93/iss4/5