ACCT 431-Fall 2014
The Dodd-Frank Act, also known as the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Dodd-Frank Act was introduced in the House of Representatives by Financial Services Committee Chairman Barney Frank, and by the Senate Banking Committee former Chairman Chris Dodd and therefor named after the two men. The Dodd-Frank represents the most comprehensive financial regulatory reform measures taken since the Great Depression; it was initiated in response to the devastating Financial Crisis of 2007-2008. In simplest terms, the Dodd-Frank Act is a law that places major regulations on the financial industry. In general, ...view middle of the document...
In broad and significant areas, the Act endows regulators with wholly discretionary authority to write and interpret new rules. The Act also extends the reach of the Federal Reserve’s authority beyond the banks and gives the Reserve the power to monitor all agencies that engage in financial activities.
Another important component of the Act is its consumer protection provisions that safeguard the American public from abusive financial practices. The Act also created the Consumer Financial Protection Bureau, which further regulated retail financial products and services geared towards to public. At the same time, The Consumer Financial Protection Bureau has many other important attributes. It is led by an independent director appointed by the President of the United States. The fact that it is run by an independent director strengthens consumer protection responsibilities that were previously handled by the Office of the Comptroller of the Currency, the Federal Reserve, and other forms of oversight in the finance industry.
Perhaps the most significant power of this bureau is the fact that it can write rules for consumer protections governing all financial institutions that offer products or services. For the first time, consumers are now able to report problems with financial products and services more easily due to the creation of a consumer hotline. Also, the bureau acts fast in response to consumer’s problems and bad business practices. People will no longer have to wait for Congress to enact specific protection laws that deal with their exact situation.
Personally, I believe that the Dodd-Frank Act was justified and necessary. It may impose more costs upon the financial/banking industry, but there is always a cost associated with regulation. These large financial institutions cannot continue to operate without any accountability or system of checks and balances. Since investors are risk-adverse by nature, you would think that they would take comfort in the fact that the financial markets are answering to a higher authority. Taxpayers should also hope...