The conundrum of legislating risk reduction through financial regulatory reform: The case of Dodd-Frank and FASB accounting changes

Purpose – The purpose of this paper is to examine the legislative process, in order to determine the likely effectiveness of financial reform efforts in the USA. Design/methodology/approach – Case study of the legislative process, particularly the less visible parts such as rule making, that shaped the passage and implementation of the Dodd-Frank Act and the failed Financial Accounting Standards Board (FASB) reform. Findings – It is found that the process of financial reform legislation is structured in such a way as to thwart major reform, at least in the short run. Practical implications – The passage of a particular piece of legislation may be the least important element in the process of reform. Rule making and the decisions as to how a law will be implemented, can advance or significantly defeat the quest for change. Social implications – Much of what occurs in the legislative process is invisible, or appears arcane, to the ordinary citizen but can have major impact on their lives. Originality/value – The paper provides a road map to understanding the least visible parts of financial reform efforts and suggests ways of achieving reform outcomes.