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Most Americans, if asked what Dodd-Frank was designed to do, would likely say that it is supposed to stop banks from doing the stupid crap that almost killed the economy. Failing that, they would say, it should give the government the power to save the economy from being sucked under water like a swimmer in a riptide by the death of one big bank.

In a recent article for Columbia Law School Magazine, James Surowiecki of The New Yorker is the latest to evaluate whether Dodd-Frank lives up to those expectations.

. . . if you measure the new law according to what the financial system needs, you probably would have to give it something closer to a “pass,” or perhaps even an “incomplete.” Even though it is more than 2,000 pages long, there are a surprising number of big, systemic problems that the law does not even attempt to address.

Surowiecki notes that the law doesn’t address the mortgage-backed securities market and the explosion in exotic financial instruments that drove the collapse, nor does it do anything about Fannie Mae or Freddie Mac, the two huge government-controlled mortgage lenders that are groaning under the weight of hundreds of billions of dollars in bad mortgages. It doesn’t address money-market funds, which have trillions of dollars under management, and are seen as safe investments, but are subject to little supervision. The Volker rule, which limits proprietary trading by banks, made it through, but in a weaker form.

On the plus side of equation, Surowiecki lauds new rules governing the credit rating agencies, the creation of a consumer protection agency, and most important, resolution power granted to the government, which can now take over and wind down major financial institutions. But even here, there are questions. Congress declined to create a fund to pay for unwinding a big bank after Republicans decried it as “a bailout fund.” So that means that the government will have to pay for any bailout up front, and then try to recoup the money through a tax on banks.

Speaking of exotic financial instruments, our fellow nonprofit investigative journalists over at ProPublica have been doing some dandy reporting about how after the housing boom began to slow in mid-2006, a handful of major banks, led by Merrill Lynch, ramped up a self-dealing operation that would make a crooked Las Vegas blackjack dealer proud.

The first story, by Jake Bernstein and Jesse Eisinger in collaboration with Planet Money, described how the banks created and provided most of the money for new collateralized debt obligations, or CDOs. Those CDOs then bought up the hard-to-sell pieces of earlier CDOs they had created, thus ensuring that the market for these toxic assets wouldn’t dry up. This week, ProPublica released this fun interactive graphic that allows users to see for themselves which banks’ CDOs had cross-ownership.

Dodd-Frank doesn’t address the CDO market, but it does give bank workers new whistleblower protections. To get the word out, the Service Employees International Union has launched a campaign to encourage bank customers to inform those workers of their rights.

And what is the best way to do this? The SEIU wants customers to bring this flyer to their personal banker or teller. So, just walk into a bank, ask for money, and then hand over this note. (Financial Reform Watch declines to opine on the wisdom of this plan, but we do recommend that you keep your engine running).

In related financial reform news, David Kotz, the inspector general at the Securities and Exchange Commission, testified before Congress this week that the timing of the civil fraud lawsuit against Goldman Sachs earlier this year was “suspicious,” and suggested that the agency wanted to distract attention away from his report criticizing the agency’s investigation of Allen Stanford’s alleged $7 billion Ponzi scheme. That report came out the same day.

“It would strain credulity to think it was coincidental,” he said, according to a Wall Street Journal report. “I can’t give you a conclusion right now, but it was suspicious.”

Kotz’s statements aren’t likely to endear him any further to SEC staffers and alumni, several of whom, as we previously reported, have criticized the inspector general for making public an investigation without first producing hard evidence of improper conduct.

Finally, Columbia Law School Magazine wants to know whether you think financial reform legislation will prevent a future financial crisis. Well, do you? Cast your vote here.

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