This is the Cato Daily Podcast for Wednesday, May 20th, 2015.

I'm Caleb Brown.

The Dodd-Frank Financial Reform was comparable in scale and scope to the New Deal.

It also shares in the assumption that financial crisis is often caused primarily by market

participants.

Paul Mahoney is the dean of the Virginia School of Law in his new book, Wasting a Crisis.

Mahoney outlines how many government actors deflect blame for fomenting crisis.

He discussed the book of the Cato Institute last week.

So most major securities reforms in the United States and indeed elsewhere share two important characteristics.

They're typically adopted in the aftermath of a stock market crash.

And they're also publicly justified by what I in the book call a market failure narrative, which

contains three key claims. First, that misbehavior by securities, issuers, traders, or financial intermediaries caused the crash.

Second, that a lack of regulation permitted the misbehavior, and third, that the reforms will prevent a repetition of the problem.

The key claims in my book are that these narratives are usually wrong, and the resulting reforms

typically curtail competition within the most

directly affected segments of the regulated industry with modest

offsetting benefits to investors. Accordingly, Congress and regulators in the future should avoid the temptation to overhaul

financial regulation in the immediate aftermath of a crisis.

I try to illustrate these points with multiple examples

starting with the first significant securities

regulatory statute in England

enacted in 1697 after the 1696 run on the Bank of England,

...