Does Dodd-Frank Have Real Teeth?

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( TheStreet) -- When Dodd-Frank was enacted on July 21, 2010, nobody was happy. I did not believe the Act dealt with the causes of the banking collapse, and I was not alone. On the other hand, many in banking believed the law was far too restrictive. There is general agreement that the law is too wordy (368,925) and complex. Since it was enacted, almost two years ago, it is worth taking a close look at both the language of the bill and what has changed in the banking industry since its enactment.

Key Provision: The Volcker Rule

Former Treasury Secretary Paul Volker does not believe banks should be allowed to trade for their own account -- too risky. It is interesting to look at how his influence ebbed and flowed during the bill's development.

Just after the bank collapse, everyone was looking to Volcker on what should be done. Obama seemed quite taken with him. But Larry Summers, Tim Geithner and their buddies in the financial industry did not want the Volcker Rule in the bank reform bill, so all of a sudden, he was no longer a White House regular. But in Congress, his influence remained strong -- Barney Frank, Carl Levin, et al.

So where is Volcker in the bill? Title VI, Sec. 619, (a)(1) reads:

"Unless otherwise provided in this section, a banking entity shall not -- (A) engage in proprietary trading; or (B) acquire or retain any equity, partnership, or other ownership interest in or sponsor a hedge fund or a private equity fund. ... In no case may the aggregate of all of the interests of the banking entity in all such funds exceed 3% of the Tier 1 capital of the banking entity."

That sounds pretty good. So let's look at this from some other perspectives.

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