Dodd-Frank Act

The Dodd-Frank Wall Street Reform and Consume Protection Act was signed into Federal law in 2010 by President Obama. The bill was introduced to the House by then Financial Services Committee Chairman Barney Frank and was introduced to the Senate by then Chairman Chriss Dodd. 

Why? Well, it was a federal response to the lack of regulation that allowed the financial crisis of 2008 to occur. The bill was the largest proposed regulation of the financial sector since the Great Depression and was designed to increase accountability and transparency in the American financial system.

What did it include? The bill included consolidation of regulatory agencies, increased transparency of derivatives (financial contracts), a new consumer protection agency to safeguard citizens from banks, a resolution group to help the FDIC (Federal Deposit Insurance Corporation) with winding down bankrupt firms, and tightened regulation on credit ranking agencies. These are just a few of the major components. 

Anything else I should know? Yes. The Consumer Financial Protection Bureau was also created under Dodd-Frank and was a consolidation of regulatory agencies. Before, there were about 10 regulatory agencies that were supposed to monitor the banks, but since there were so many, none of them really had to pay close attention. Hence the 2008 crash. The CFPB fixed this problem and created accountable regulation. 

Another thing to note: the Orderly Liquidation Fund. This Fund was created so that when banks failed, they could be allowed to wind down, rather than automatically bailed out by the government. This meant that failing financial institutions were allowed to fail without costing risky government dollars. 

Dodd-Frank provided the accountability that was needed to restructure the financial sector post-2008 and that also enabled the amount of economic growth we have seen in the 9 years since.