At the height of the financial crisis in 2008, former North Carolina Congressman Brad Miller found himself searching for answers on Wikipedia. He was looking up “credit default swaps,” which the website defines as “a financial swap agreement that the seller…will compensate the buyer (usually the creditor of the reference loan) in the event of a loan default (by the debtor) or other credit event.” Largely unregulated, those swaps and other complex derivatives both amplified and obscured the risks of all the bad loans that mortgage companies had made and sold—and they bankrupted AIG. Miller was a member of the Financial Services Committee and a critic of the mortgage lending industry, but even he had no idea what they were.
“After I finished reading the Wikipedia entry on credit default swaps, I probably knew more about them than any other member of Congress,” Miller told me recently, on the fifth anniversary of the Dodd-Frank financial-reform law. Cleaning up the derivatives market was one of the main pillars of that landmark legislation. On that front, and in many other respects, the law’s legacy is still a work in progress, hampered by repeated attempts by Wall Street and its allies in Congress to undermine implementation, and by foot-dragging in some regulatory agencies.
But the law did offer substantive reforms, and Miller’s fingerprints are on many of them. He proposed in committee the creation of the independent agency that became the Consumer Financial Protection Bureau, and shepherded it through the House; worked with then–FDIC chair Sheila Bair to toughen the “living will” provision of Dodd-Frank, which requires banks to create plans for their own dissolution; and introduced an amendment to restrict the risky, speculative trading undertaken by banks, a limit now known as the Volcker Rule. Miller continued to push for reforms to the financial system and strong consumer protections beyond the bounds of Dodd-Frank until he left Congress in 2013.
With the five-year anniversary in mind, I spoke with Miller about Dodd-Frank’s legacy, Congress’s ability to oversee the financial industry going forward, and accountability for criminal actors. The conversation has been edited for length and clarity.
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Zoë Carpenter: Five years out from the passage of Dodd-Frank, what pieces of financial reform are going well, and what’s not?
Brad Miller: Dodd-Frank was a compromise, and obviously reformers didn’t get everything we wanted by any means. But things are better on a lot of fronts, and still very fragile and there are a lot of problems on other fronts.
In consumer finance, the creation of the Consumer Finance Protection Bureau was an enormous advance. The mortgage rules, although the were not perfect, are certainly going to protect against the most outrageous abuses, the predation of the last decade which led to the foreclosure crisis and really the sharp drop in the life savings of American families. The median American family suffered a 40 percent loss of net worth, of life savings, in five years following the financial crisis, almost entirely because of the foreclosure crisis. For the African-American and Latino middle class, it has almost been an extinction event. The loss to the African-American and Latino communities were much worse because they were so targeted by predatory mortgage lending practices.