First, Dodd-Frank didn’t even attempt to reform the broken housing-finance system. The legislation simply ignored Fannie Mae and Freddie Mac, the flawed government-sponsored mortgage giants at the heart of the housing crisis. Why? The enormous influence that special interest groups such as realtors, homebuilders, housing advocates, and Wall Street firms wield in Washington made seriously tackling this issue politically dangerous. Despite their bravado, that was not a price the drafters of Dodd-Frank were willing to pay.

Second, Dodd-Frank not only failed to solve the problem of “too-big-to fail,” it institutionalized it. On the most basic level, Dodd-Frank, with its myriad regulatory complexities, gives big banks a competitive edge over their smaller rivals, who can’t afford the lawyers and compliance personnel the law necessitates. …

Third, the authors of Dodd-Frank seem to believe that regulators were resurrected from the crisis as omniscient, infallible, super-humans. Bureaucracies — from the Securities and Exchange Commission to the Federal Reserve, many of which failed in their oversight roles the last time around — were given vast new powers. And these powers don’t just affect the core players in the financial system, they also reach Main Street companies that had nothing to do with causing the crisis. Rather than defining these new powers precisely, Congress afforded the regulators tremendous discretion to define the limits of their own authority. In fact, so much of the decision-making was left to regulators that the full implications of the law may not be known for years.