The Dodd-Frank Wall Street Reform and Consumer Protection Act

1575 Words4 Pages

The Dodd-Frank Wall Street Reform and Consumer Protection Act brought the most significant changes to financial regulation in the United States since the reform that followed the Great Depression. It made changes in the American financial regulatory environment that affect all federal financial regulatory agencies and almost every part of the nation’s financial services industry. Like Glass-Steagall, the legislation passed after the Great Depression, it sought to regulate the financial markets and make another economic crisis less likely. Banks were deregulated in 1999 by the Gramm-Leach-Biley Act, which repealed the Glass-Steagall Act and essentially allowed for the excessive risk taken on by banks that caused the most recent financial crisis. The Financial Stability Oversight Council was established through the Dodd-Frank Wall Street Reform and Consumer Protection Act and was created to address the systemic risks in the United States financial system and to improve coordination among financial regulators. The presence of systemic risk in the current United States financial system is undeniable. Systemic risks exist when the failure of one firm may topple others and destabilize the entire financial system. The firm is then "too big to fail," or perhaps more precisely, "too interconnected to fail.” The Federal Stability Oversight Council is charged with identifying systemic risks and gaps in regulation, making recommendations to regulators to address threats to financial stability, and promoting market discipline by eliminating the expectation that the US federal government will come to the assistance of firms in financial distress. Systemic risks can come through multiple forms, including counterparty risk on other financial ... ... middle of paper ... ...d an intolerable level of systemic risk. The signing of the Volcker Rule by President Obama after much heated debate led the way for the discussion of the Lincoln Amendment. This piece of legislation proposed the idea of limiting bank derivate transactions to separately capitalized affiliates whose failure would presumably be less likely to cause a systemic crisis (pg. 198). The Dodd-Frank Wall Street Reform and Consumer Protection Act’s policies haven’t really been implemented to the extent that regulators would have liked. Although the legislation takes many steps in addressing systematic risks in the United States financial system and improving coordination among regulators, some critics believe that alternative options might have been more effective. The coming years will give us a better understanding of how well the Dodd-Frank Act addressed these concerns.

Show More
Related

  • 1933 Banking Act Pros And Cons

    1747 Words  | 4 Pages

    Consequently, the provisions to separate commercial banking from securities and investment firms were regarded as a way to diminish the risk associated with providing such deposit insurance. Although some historians argue that the depression itself is what caused the collapse of the banking system, in 1933 the general consensus was that banks had provoked the failure by engaging in shady and abusive practices with depositor’s money. Congressional hearings conducted in early 1933 seemed to indicate that bankers and brokers were guilty of “disreputable and seemingly dishonest dealings, and gross misuses of the public's trust” (“Understanding How”, 1998). The Glass Steagall act was the main legislative response of President Roosevelt’s administration to the unprecedented financial turmoil that was facing the nation in the middle of a deep depression. It was intended to regulate and stabilize the banking industry, reduce risk, and provide consumers with confidence in the financial

    Read More

  • The Financial Crisis of 2007-2008 and The Federal Reserve

    2612 Words  | 6 Pages

    In addition, the Federal Reserve did badly on supervision of the financial market. Many banks did not have enough ability to value their risk. The Federal Reserve and other supervision institution should require these banks to enhance their ability of risk valuing.

    Read More

  • Compare And Contrast The Great Depression And The New Deal

    1257 Words  | 3 Pages

    The shares values had fallen and this left people panicking. Many businesses closed and several of the banks did not last because of the businesses collapsing. Many people lost their jobs because of this factor. Congress passed Roosevelt’s Emergency Banking Act, which helped reorganize the banks and closed the ones that were insolvent. Then three days later he urged Americans to put their savings back in their banks and by the end of the month basically three quarters of them reopened. Many people refer to the Banking Act as the Glass Steagall Act that ended up prohibiting commercial banks from engaging in the investment business and created the Federal Deposit Insurance Corporation. The purpose of this was to get rid of the speculations in securities making banking safer than before. The demand for goods were declining, so the value of the money was

    Read More

  • Analysis Of Jpmorgan Chase, Bailouts, And Ethics

    601 Words  | 2 Pages

    “Too big to fail” is a theory that suggests some financial institutions are so large and so powerful that their failure would be disastrous to the local and global economy, and therefore must be assisted by the government when struggles arise. Supporters of this idea argue that there are some institutions are so important that they should be the recipients of beneficial financial and economic policies from government. On the other hand, opponents express that one of the main problems that may arise is moral hazard, where a firm that receives gains from these advantageous policies will seek to profit by it, purposely taking positions that are high-risk high-return, because they are able to leverage these risks based on their given policy. Critics see the theory as counter-productive, and that banks and financial institutions should be left to fail if their risk management is not effective. Is continually bailing out these institutions considered ethical? There are many facets that must be tak...

    Read More

  • New Deal Dbq

    584 Words  | 2 Pages

    The job of the FDIC is to provide deposit insurance for members of the banks up to $250,000. An average of 600 banks per year failed between 1921 and 1929. During the initial years are the Great Depression many banks also failed and bank “runs” became common practice. The Glass-Steagall Act or Banking Act of 1933 held responsibility of ensuring deposits within eligible banks until becoming a permanent government agency through the Banking Act of 1935. Since the start of the corporation on January 1, 1934 no depositor has lost any insured funds. As of 2014, the FDIC insured deposits at over 6,670 institutions. Funds deposited into the banks backed by the full faith and credit of the United States Government, are secure. Without the FDIC there would be little confidence in the banking system and irregular quantities of available cash for the community. The FDIC is a successful and necessary

    Read More

  • The American Recovery and Reinvestment Act

    1593 Words  | 4 Pages

    The American Recovery and Reinvestment Act was signed into law by President Obama on February 21, 2009. The law had three major goals which were all aimed at stimulating a sluggish US economy. The first goal was to create new jobs and save existing ones by tax credits for hiring new employees. The second goal was to spur economic activity and investment in long term growth by increasing the amount of business asset that could be acquired by companies while allowing for immediate deductions for the cost of the assets as well as numerous tax credits for individuals and businesses. The third goal was to foster unprecedented levels of accountability and transparency in government spending by requiring recipients of recovery act funds to post acknowledgements on the Recovery.gov website.

    Read More

  • Summary: The Gramm-Leach-Bliley Act

    628 Words  | 2 Pages

    Since 1933 there has been numerous proceedings of regulation of banks. Regulations as the Glass-Steagall Act, which is the separates of commercial and investment banking. FDIC insurance, which protects depositors from losing their money. Tougher SEC regulations that allow you to invest on Wall Street without being cheated. As a result, for almost 50 years, there was no banks that failed, no major crises and the economy recovered from the Great Depression. Several economists believed that trend would have continued if not for deregulation. Although, deregulation somewhat increases the economy, it also causes unsustainable bubbles, increase riskiness in banks, and if things turn for the worst (like 2008), the banks are bailed out, and we the

    Read More

  • Pros And Cons Of Volcker Rule

    905 Words  | 2 Pages

    The core idea of Volcker rule is to make banks in the U.S change mixed management to segregate management, in other words, Volcker rule tends to separate commercial banks and investment banks. This may bring harm to some people’s benefits; especially the beneficiary in Wall Street, but some people can still get benefits from Volcker rule and support this in different ways.

    Read More

  • New Deal Dbq

    717 Words  | 2 Pages

    The Glass-Steagall Act was passed which prohibited commercial banks from engaging in the investment business. This was a major issue that contributed to the cause of The Great Depression. In integration, indemnification companies were engendered. The FDIC insured bank deposits and the SEC forfended investors.

    Read More

  • Dodd-Frank Act Case Study

    505 Words  | 2 Pages

    Major banks are cutting back on some of their legally permitted operations, such as- market making, and that has led to liquidity issues in the bond markets. Proprietary trading could become unregulated if more banking activities continue moving towards the shadow banking system. This would essentially defeat one of the main purposes of Volcker Rule. [d] The third major unintended consequence has been the degree by which the Federal Reserve has become the main regulator of the finance industry. In order to discourage future bailouts similar to the ones during the financial crisis, the Dodd-Frank Act limited the Fed’s emergency powers. However the liquidity and capital standards now imposed by Fed has purportedly become one of the most important regulatory developments of the Dodd-Frank Act.

    Read More

  • First Person Narrative: Franklin Delano Roosevelt

    1088 Words  | 3 Pages

    In October of 1929, the American economy took a huge hit from the stock market crash. Since so much people had invested their money and time in the banks, when the banks closed many had lost all of their money and were in the deep poverty. Because of this, one of my first actions of the New Deal was the Federal Deposit Insurance Corporation (FDIC). Every bank in the United States had to abide by this rule. This banking program I launched not only ensured the safety and protection of deposits made my users of banks, but had also restored America’s faith in banks, causing people to once again use banks which contributed in enriching the economy. Another legislation I was determined to get passed...

    Read More

  • Andrew Jackson And Jacksonian Democracy

    774 Words  | 2 Pages

    Andrew Jackson was a strict constitutional constructionist, he felt it was his duty to guard what he believed to be the constitution’s spirit, this is carried out when he handles South Carolina’s Nullification Crisis. Jackson makes a strong statement by passing the “1833 Force Bill”, that the position of John C. Calhoun and also his home state (South Carolina) are unconstitutional. It is also made clear by Jackson that he, as president, is prepared to back up his ideals, even with force, if necessary. By his handling of “The 1832-1841 Bank War”, Jackson further advanced his demanding constructionist position. Looking in Article I, section 8 of the Constitution, authority to create a national bank given to congress is nowhere to be found. Jackson effectively takes apart what he had viewed as a “monopoly of the foreign and domestic exchange” that had not been “compatible with justice, with sound policy, or with the Constitution of our country.” (Document B)

    Read More

  • 2008 Financial Crisis Essay

    1536 Words  | 4 Pages

    The "subprime crises" was one of the most significant financial events since the Great Depression and definitely left a mark upon the country as we remain upon a steady path towards recovering fully. The financial crisis of 2008, became a defining moment within the infrastructure of the US financial system and its need for restructuring. One of the main moments that alerted the global economy of our declining state was the bankruptcy of Lehman Brothers on Sunday, September 14, 2008 and after this the economy began spreading as companies and individuals were struggling to find a way around this crisis. (Murphy, 2008) The US banking sector was first hit with a crisis amongst liquidity and declining world stock markets as well. The subprime mortgage crisis was characterized by a decrease within the housing market due to excessive individuals and corporate debt along with risky lending and borrowing practices. Over time, the market apparently began displaying more weaknesses as the global financial system was being affected. With this being said, this brings into question about who is actually to assume blame for this financial fiasco. It is extremely hard to just assign blame to one individual party as there were many different factors at work here. This paper will analyze how the stakeholders created a financial disaster and did nothing to prevent it as the credit rating agencies created an amount of turmoil due to their unethical decisions and costly mistakes.

    Read More

  • Too Big To Fail

    893 Words  | 2 Pages

    In previous years the big financial institutions that are “too big to fail” have come to realize that they can “cheat” the system and make big money on it by making poor decisions and knowing that they will be bailed out without having any responsibly for their actions. And when they do it they also escape jail time for such action because of the fear that if a criminal case was filed against any one of the so called “too big to fail” financial institutions it...

    Read More

  • The Securities And Exchange Commission

    537 Words  | 2 Pages

    During the 1920s, approximately 20 million Americans took advantage of post-war prosperity by purchasing shares of stock in various securities exchanges. When the stock market crashed in 1929, the fortunes of many investors were lost. In addition, banks lost great sums of money in the Crash because they had invested heavily in the markets. When people feared their banks might not be able to pay back the money that depositors had in their accounts, a “run” on the banking system caused many bank failures. After the crash, public confidence in the market and the economy fell sharply. In response, Congress held hearings to identify the problems and look for solutions; the answer was found in the new SEC. The Commission was established in 1934 to enforce new securities laws that were passed with the Securities Act of 1933 and the Securities Exchange Act of 1934. The two new laws stated that “Companies publicly offering securities must tell the public the truth about their businesses, the securities they are selling and the risks involved in the investing.” Secondly, “People who sell and trade securities must treat investors fairly and honestly, putting investors’ interests first.”2

    Read More

More about The Dodd-Frank Wall Street Reform and Consumer Protection Act

Open Document