WASHINGTON — The Dodd-Frank Act is about to get a top-to-bottom appraisal.

The Bipartisan Policy Center on Thursday will launch its Financial Regulatory Reform Initiative, which will assess the law's effectiveness and recommend improvements in a report expected next fall.

The center has hired one of Dodd-Frank's architects, Aaron Klein, to run the project. Klein worked for former Sen. Chris Dodd and served in the Obama administration as deputy assistant Treasury secretary for economic policy and policy coordination.

"One side is saying repeal Dodd-Frank, and the other side is saying don't touch a word," Klein said in an interview Wednesday. "We think neither one is a plausible long-term strategy or solution, so that creates the space to bring people together from both sides to try to hammer through [this question:] Dodd-Frank is here to stay, how can we improve it?"

The co-chairs of the effort are Martin Baily, a Democrat, and Phil Swagel, a Republican.

Baily chaired the Council of Economic Advisors during the Clinton administration and is a senior fellow at the Brookings Institution. Swagel was assistant Treasury secretary for economic policy during the Bush administration and is a visiting scholar at the American Enterprise Institute as well as a professor at the University of Maryland School of Public Policy.

"One of the things that we are going to bring with this project is details and substance," Swagel said in an interview. "This is not going to be, 'Here are our principles for reform.' This is going to be, 'Here are the specific changes' that need to be made."

The reform initiative breaks the law into five parts:

  • systemic risk, which will evaluate the role of the Financial Stability Oversight Council and the process of designating financial institutions as systemically important;
  • failure resolution, which will include a look at living wills and the orderly liquidation authority;
  • capital markets, including the Volcker rule;
  • consumer protection;
  • regulatory architecture, which will tackle the thorny question of consolidating various agencies.

Baily and Swagel will sit on all five of those working groups and will be joined by two to four others on each. The center is recruiting former regulators, academics and other sorts of experts to serve on each group. Baily said they weren't ready to name the people who've agreed to participate but did say former Treasury undersecretary and Wachovia Chief Executive Robert Steel is among them.
"Some people say any changes will be to weaken the law. I just don't think that's right," Swagel said. "It is possible to improve without weakening."

"I very much agree with that," Baily said. "As co-chairs we're in sync on that."

Founded in 2007 by four former Senate Majority Leaders, the Bipartisan Policy Center tries to bring Republicans and Democrats together to find solutions to intractable policy issues facing the economy as well as various sectors like health care and energy.

The group hopes to have its first report out next spring and then release one a month through the summer on each of the five areas. A final, comprehensive report is expected in the fall.

"Our sense is that after the election and after we've dealt with the fiscal cliff, there will be a time in 2013 when people can look with slightly cooler heads and say, 'We are not going to repeal Dodd-Frank, but there are some areas that need fine-tuning or maybe some not-so-fine tuning, so let's take a look at those,' " said Baily.

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