Lew: U.S. can’t relax when it comes to Wall Street

Treasury Secretary Jack Lew said the U.S. needs to remain vigilant when it comes to monitoring the financial system and not become complacent as the crisis fades into the past.

With the five-year anniversary of the enactment of the Dodd-Frank financial reform law coming up later this month, Lew argued the law has strengthened the financial system without handcuffing the economy.

{mosads}He also said policymakers should “build on” the work already done and warned against allowing a looser grip on the financial sector in the years ahead.

“We should not be lulled into thinking that we can return to the pre-crisis way of doing things,” he said at an event hosted by the Brookings Institution. “It would be a grave mistake to assume that banks can self-regulate, that excessive risk-taking is a thing of the past and that Wall Street cannot harm Main Street.”

Despite broad GOP critiques of the law, Dodd-Frank has remained more or less intact since it was first passed five years ago. The focus in Congress has shifted from broad bills aimed at altering or scrapping huge chunks of the law to more targeted bills, often aimed at aiding smaller banks and institutions struggling under the influx of new rules.

On Wednesday, Lew mounted yet another defense of the law as it is, dismissing arguments that it was hampering market liquidity and also criticizing some proposed changes he says are primarily aimed at weakening the law, not improving it.

For example, Lew criticized legislation offered by Senate Banking Committee Chairman Richard Shelby (R-Ala.), which would raise the threshold for banks that face heightened regulations from $50 billion in assets to $500 billion in assets.

Lew argued that raising the bar that much would carve out some of the nation’s largest financial institutions from heightened scrutiny, adding that those banks are not ones anyone would confuse with “Main Street” banks.

“We have to be very careful about changes that are really designed to attack the heart of Dodd-Frank,” he said.

“It is clear Wall Street reform is working.”

At the same time, Lew did acknowledge that there could be some improvements to the law, although he did not elaborate on what those might be.

“It is written by human beings in a political process,” he said. “I can’t sit here and say it’s somehow holy writ.”