Libor scandal and JP Morgan trade show financial reform needed, just not Dodd-Frank

It is clear from the Libor scandal and the JP Morgan credit default swap trade that there is a need for financial regulation.

What is equally clear is that the 2,000+ page Dodd-Frank Act and all of its thousands of pages of regulations to implement the Act would not have prevented either the Libor scandal or the CDS trade (remember, the stated intent of the trade was to hedge a risk in the commercial bank).

Regular readers are not surprised by this.

Dodd-Frank was written and passed before there was an exhaustive examination, like the Pecora Commission, of what caused the crisis.  Dodd-Frank was written and passed before the Financial Crisis Inquiry Commission could make its report.  Dodd-Frank was written and passed before the NY Fed let anyone know that Libor was being manipulated.

Given these facts, other than luck, why would anyone think that Dodd-Frank would have any positive impact.

Fortunately, the Libor scandal and the JP Morgan trade reopen the discussion of exactly what financial reform is needed.

The critical question that financial reform has to answer is would having the reform in place have prevented the Libor scandal or the JP Morgan trade or (fill in the blank with another banking scandal) from happening.