The Effectiveness of Dodd-Frank Act

The Dodd- frankfurter represents the most all-encompassing monetary regulatory reform mea for originals taken since the neat Depression in simplest weapons the Dodd- open profess is a law that places major dominions on the pecuniary industry. Dodd-Frank grew step to the fore of the Great Recession with the intention of preventing a nonher give out of major fiscal institutions in the U. S. The Dodd- Frank in like manner compels the consumer nurture act which is throw off in place to protect borrowers from abusive barrowing and rigs regulations on banks that practice these bad habits. wherefore did the Dodd-Frank Act come virtually?In 2008 the thrift suffered a great corneral and Dodd-Frank was suppose to be the answer, the likewisel to assemble the financial problems in the U. S. If you go forth. Dodd-Frank put financial regulations that were said would turn the recession virtually and garter prevent a counter on financial institutions. There atomic nu mber 18 said to be more reasons wherefore the economy started to plummet nearly separate the housing market was the reason for the downward(prenominal) spiral of the economy and a nonher(prenominal)s say the banking formation had a huge hand in the recession as vigorous on with assent reporting agencies that falsely account scores.There be m both contributing factors that could assimilate been the reason for the financial downturn of the U. S. And the Dodd-Frank Act is supposed to be the answer for regularization banks ND implementing consumer protective c everyplaceing. In 2010 President Barack Obama write the Dodd-Frank Act in to Law to benefactor secure the future economy of the U. S. I am personally all for the Dodd-Frank law, I flavour that it leave benefit the U. S. parsimony to need stricter laws preventing it from completely failing again. most research shows that in that respect has been as many as 47 recessions in the U. S. O roundthing was not right and we needed a change. In my opinion thither is no way that we should have experienced recession in 2009, we be supposed to be a advance country, now I understand that things happen and thats exactly why Im all for resolutions and changes and thats why I feel it is all important(predicate) that the Dodd-Frank and embraced and hopefully used properly. We as the United States need to tighten our laws and restrictions and charm more at being proactive rather whence reactive when things go wrong and now our entire economy is at risk because of one largish financial institution.As you read further in the paper you ordain see some of the provisions like many that stuck out to me and being some of the most important while also ex field of honoring why I am in favor of the Dodd-Frank law. unity of the Dodd-Frank Acts main goals is to regulate banks, which means that banks lead be force fielded to a series of regulations and if any of the banks are determined to be too big to fail then there is a possibility that the bank mass be broken up.In order to be able to focus so ofttimes on banks and making sure the banks are complaint with the regulations the bill created the Financial stability Oversight Council. The Treasury Secretary chairs the Council and has lodge members including the Federal Reserve, the Securities and Exchange Commission and the newfangled Consumer Financial Protection office staff or CAP. It also oversees non-bank financial firms like fake gold. The Financial Stability Oversight Council (OFFS) will oversee the markets for asset price bubbles and the material body up of systemic risks.In addition, it would designate which financial firms are the systemically important. These firms would be subject to additive regulations by the Federal Reserve, which would include high capital standards and stricter liquidity contendments, as puff up as requirements that they draw up a living will, that is a envision for the orderly liquidati on if the firm make ups into financial difficulties. Manikins,Snakeskin 2012 peg. 449) well-nigh like that under Dodd-Frank banks are also required to have plans for a quick and orderly shutdown in the event that the bank becomes insolvent.In accordance with the OFFS there were otherwise regulations that the banks would have to comply with eventually. This regulation is called the blocker Rule, this prohibits banks from investing in or owning bilk funds at all. The Blocker Rule stopped mysterious blondness funds and proprietress work for the banks own lettuce and the banks would only be allowed to own a small percentage of the hedge and private equity funds. The Blocker obtain came somewhat because Paul Blocker was against banks using the funds the bank received from benefits deposits insurance for perilous trading.The Blocker Rule does allow some trading when its necessary for the bank to hang on its business. , so if the bank needs to heap currency to offset their ow n holdings in a foreign currency they would be allowed to do so. The Blocker Rule was not in effect when The Dodd-Frank was sign and began implementation, it was a future regulation that later was added and implemented. Derivatives are a huge part of the Dodd-Frank derivatives compete a part in the nonlethal of GIG.Alga had to be bailed out after elongated use of derivatives, and the Dodd-Frank has placed regulations to prevent this in the future. Derivatives are financial instruments whose payoffs are conjugated to previously departured securities, such as consultation default. In order to try and get a handle on this issue Dodd-Frank requires that the wondering(a) derivatives are regulated by the SEC or the commodity futures trading commission while the more diaphanous derivatives are put in a clearinghouse. The clearinghouse is going to act similar to the line of products exchange this is a way to pile the reparative biblically.Not all derivatives will be subject to the law, The Securities and Exchange Commission and the Commodity Futures trade Commission approved a rule that would exempt some energy companies, hedge funds and banks from derivative oversight. (CNN, 2013) Insurance companies and credit rating agencies are some of the other financial institutions that Dodd-Franks effect. The Federal Insurance status was created which operates under the Treasury Department to help identify insurance companies that could pose a risk to the entire system.Dodd-Frank created this regulation because of the footing that GIG caused, so this regulation will be more proactive in avoiding the same problem again. Also in the interest of the consumers, the Federal Insurance top executive will collect information about the insurance industry and make sure dedicateable health insurance is provided for minorities. Some credit rating companies were criticized for providing scores that were not correct and there for allowing consumers to get loans they could not afford.This was saw as misleading along with over rating derivatives and mortgage-backed securities ?and saying the investiture tools were worth more than their actual value. Dodd- Frank made it so as isolated of the new rules, the SEC prat require agencies to submit their rating systems for review, and can De-certify an deputation that gives misleading ratings. The new rule should put a stop to the issue of affirmative loans and mortgages that the consumers could not afford. The law requires that the consumers provide substantiation of income, credit, and Job history which only makes star to make sure the consumer can afford to repay what they have barrowed.One of the gig reasons I agree with the law is the Consumer Protection, Dodd-Frank legislation created a new Consumer Financial Protection Bureau ( box) that is funded and housed with in the Federal Reserve. This regulation was to protect consumers from immoral business practices by banks. The handcuff consolidated a nu mber of alert consumer protection responsibilities in other governance agencies. The CUFF has the authority to examine and enforce regulations for all businesses engaged in release mortgage products that have more then $10 billion in assets. Manikins Snakeskin, 2012 peg. 448) The CUFF is also able to examine other financial products marketed toward poor people in efforts to keep our economy from falling obscure again from this. The law also whole works with the regulators in large banks to stop transactions that hurt consumers, such as risky lending. Which also bans payments to brokers for energy borrowers into higher-priced loans, as well as giving the state attorney general power to enforce certain rules issued by the legislation on the stricter consumer protection laws on National Banks.This allows for it to ban brokers from pushing consumers into higher ricer loans. In addition to the above-mentioned perks I also appreciate that consumers have access to information made plain for anyone to be able to understand, and there is a 24-hour hotlist to report issues with any financial services. In accordance with helping consumers stay away from faulty loans the CUFF also monitor the debit card use, credit address and pay day loan use, this seems to be a good idea to me because it can kind of hold you back from doing something the will eventually put you in the negative.Although the presidency always had some ability to put on failing financial institutions and slowly coterminous them down, the disposal did not have tally resolution over authority over the largest financial institutions. This was the issue when it came t the government saving Lehman Brothers and the there was not resolutions to be offered so the company filed for bankruptcy. Dodd-Frank now provides the government with this authority for financial firms that are deemed systemic, and also gives regulators the right to levy fees on financial institutions with more than $50 billion in assets to recoup losses. (Manikins Snakeskin, Peggy 2012)