With the recent publication of its final rule, the federal government's Financial Stability Oversight Council is now in position to designate certain nonbank firms as "systemically important financial institutions" (SIFIs). There is probably no aspect of the Dodd-Frank Act that will have more damaging effects on competition in the U.S. financial system.

Under the Dodd-Frank financial-reform law, large nonbank firms may be declared systemically important because their failure will cause a systemic breakdown. In effect, this amounts to a government statement that these firms are too big to fail.

Discolsures contained in SEC complaints further validate the necessity to look behind Fannie and Freddie's characterization of subprime loans.  

On April 13, 2012, the US Department of the Treasury released new cost estimates for the Troubled Asset Relief Program. Looking principally at actual and projected contractual cash flows, the document concludes that: "Overall, the government is now expected to at least break even on its financial stability programs and may realize a positive return." 

Secretary Geithner argued that we have forgotten the reasons that the Dodd-Frank Act was necessary, and that's why the act has become so controversial. What the secretary seems to have missed is that we have learned a lot in the intervening years. The administration's rush to judgment on the financial crisis is a case study in why it would have been worthwhile to wait for the facts.

Longstanding policies that were intended to promote confidence in the independence of regulatory decision-making have now been wiped away by the Dodd-Frank act, which has in effect placed all the financial regulators under the direction of the Treasury secretary.

When the bubble deflated in 2007, an unprecedented number of weak mortgages went into default - those that were held or guaranteed by Fannie and Freddie, and those that had been securitized by Wall Street. This drove down housing prices and threw Fannie and Freddie into insolvency. 

Failures in the regulation of large complex financial institutions played an important role in the financial crisis.