Financial Reform Bill: HBS Professors See it Different Ways

Working at Harvard Business School I often get questions along the lines of, "What do professors think of ..." But with 220 people on faculty, there is rarely a single HBS view, and opinions can vary widely depending on the issue.

Take the just-signed-into-law Dodd-Frank Wall Street Reform and Consumer Protection Act. Four HBS professors this week provided views on the law. For one person, the regulation is "a major step forward for our financial system and our country," while a colleague sees it as something that "may actually raise the risk to the system."

In general, there is support for enhancing transparency in the derivatives market, and for establishing a framework for monitoring and addressing systemically risky institutions, including creation of a formal resolution authority that could "unwind" a failing investment company or insurance bank.

But there were differences of opinion as to potential effectiveness of the new Consumer Financial Products Commission, and concern that some important issues have not been addressed such as what to do with Fannie Mae and Freddie Mac, excessive use of short-term funding by financial firms, and how the regulations will actually play out once put into effect.

Check out HBS Faculty Debate Financial Reform Legislation and then give us your own view on Dodd-Frank. Will establishment of a consumer protection regulator help us navigate around abusive financial products? Does government have enough tools at the ready to stop systemically risky institutions? Will new credit controls actually drive up lending prices and shrink available credit?