The Dodd–Frank Wall Street Reform and Consumer Protection Act

The Dodd–Frank Wall Street Reform and Consumer Protection Act was signed into law by President Obama on July 21, 2010.

The legislation, the most significant and comprehensive change in U.S. financial regulation since regulations imposed in the 1930's after the Great Depression, came about as a result of the U.S. financial crisis of 2008.

The legislation, often referred to as "Dodd–Frank", received it's name from former Connecticut U.S. Senator and Senate Banking Committee Chairman Chris Dodd, and former Massachusetts member of the U.S. House of Representatives and Financial Services Committee Chairman Barney Frank, who were both instrumental in creating the legislation.

The original ideas behind the legislation were introduced by President Obama in a speech he delivered at the White House on June 17, 2009. Those ideas are detailed in a document entitled FINANCIAL REGULATION REFORM - A New Foundation: Rebuilding Financial Supervision and Regulation. A condensed version of the document exists on The Wall Street Journal website entitled Obama's Financial Reform Plan: The Condensed Version.

The overall intent of the Dodd–Frank Wall Street Reform and Consumer Protection Act is to hold Wall Street accountable, and to protect American families from unfair, abusive financial practices.

Dodd–Frank includes a number of provisions intended to curb excessive risk taking:

  • Taxpayers will not have to bear the costs of Wall Street's irresponsibility: If a firm fails in the future it will be Wall Street – not the taxpayers – that pays the price.
  • Separates "proprietary trading" from the business of banking: The "Volcker Rule" will ensure that banks are no longer allowed to own, invest, or sponsor hedge funds, private equity funds, or proprietary trading operations for their own profit, unrelated to serving their customers. Responsible trading is a good thing for the markets and the economy, but firms should not be allowed to run hedge funds and private equity funds while running a bank.
  • Ending bailouts: Reform will constrain the growth of the largest financial firms, restrict the riskiest financial activities, and create a mechanism for the government to shut down failing financial companies without precipitating a financial panic that leaves taxpayers and small businesses on the hook.

Dodd–Frank also includes the creation of the Consumer Financial Protection Bureau to set "clear rules of the road" and to "ensure that financial firms are held to high standards". The CFPB "supervises banks, credit unions, and other financial companies", and it will "enforce federal consumer financial laws".

Source:

"Wall Street Reform: The Dodd-Frank Act". whitehouse.gov. Retrieved 2015-01-13.

Jan 13, 2015:

The U.S. House of Representatives passed legislation, H.Res.27, which makes a significant change to Dodd-Frank.

Jan 12, 2015:

President Obama signed the Terrorism Risk Insurance Act (TRIA) reauthorization bill.

"The law also includes measures that exempt ranchers, energy businesses and other 'end users' of derivatives from certain capital requirements that are part of the 2010 Dodd-Frank financial reform law."

Source:

Downing, Larry. (January 12, 2015). "Obama signs terrorism risk insurance bill into law". Reuters. Retrieved 2015-01-15.

Dec 16, 2014:

President Obama signed a $1.1 trillion spending bill, a bill which includes an unrelated rollback of one provision of Dodd-Frank.

Aug 1, 2013:

The lawsuit against the CFPB was dismissed by U.S. District Judge Ellen Segal Huvelle in Washington, D.C.

Sep 20, 2012:

Three states (Michigan, Oklahoma, and South Carolina) joined as plaintiffs in the lawsuit against the CFPB.

Jun 22, 2012:

A lawsuit was filed against the CFPB (Consumer Financial Protection Bureau). The lawsuit was filed by a Texas bank (State National Bank of Big Spring) and two conservative advocacy groups (the Competitive Enterprise Institute and the 60 Plus Association). The lawsuit claims the authority given to the CFPB by Dodd-Frank and President Obama's appointment of its director are unconstitutional.

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