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April 14, 2015

Wall Street’s favorite myth just got busted: The rise of “shadow banking” and the fall of GE Capital

The Dodd-Frank Act is a sprawling work of hundreds of provisions encompassing the entire financial sector. Singling out one development and insisting it shows Dodd-Frank “working” is an act of either tremendous partisanship or misinformation. In reality, it’s a testament to how big the financial system is – too big, in fact – that you can build as compelling a roster of evidence about Dodd-Frank successes as you can about its failures.

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Financial reform advocates and Obama Administration defenders leaped to praise this as a victory for Dodd-Frank. “GE’s decision shows that some of the financial reform measures regulators have taken are working,” said Dennis Kelleher of the reform group Better Markets. “The much maligned Dodd-Frank financial reform is doing some real good,” added Paul Krugman, who specifically noted how the SIFI designation cracks down on “shadow banking,” non-banks exploiting a lack of regulatory oversight to engage in risky practices.

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Read the full Salon article by David Dayen here.

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