With two major economic crises in quick succession-the subprime mortgage crises in 2008 and the debt crises in 2011 scaring many people from the markets and causing people to lose faith in the economy---8 million jobs lost, drop in housing prices and wiping out of personal savings, the US government needed to take bold actions to change things at the regulatory level, which is precisely what it is doing with the Dodd-Frank Wall Street Reform and Consumer Protection Act. Some highlights of the legislation are as follows:
Consumer Protection with Authority and Independence: Creates a new independent watchdog, housed at the Federal reserve, with the authority to ensure American consumers get the clear, accurate information they need to shop for mortgages, credit cards, and other financial products, and protect them from hidden fees, abusive terms, and deceptive practice.
Ends Too Big to Fail Bailouts: Ends the possibility that tax-payers will be asked to write a check to bail out financial firms that threaten the economy by: creating a safe way to liquidate failed financial firms; imposing tough new capital and leverage requirements that make it undesirable to get too big; updating the Fed's authority to allow system-wide support but no longer prop up individual firms; and establishing rigorous standards and supervision to protect the economy and American consumers, investors and businesses.
Advance Warning System: Creates a council to identify and address systemic risks posed by large, complex companies, products, and activities before they threaten the stability of the economy.
Transparency and accountability for exotic instruments: Eliminates loopholes that allow risky and abusive practices to go on unnoticed and unregulated---including loopholes for over-the-counter derivatives, asset-backed securities, hedge funds, mortgage brokers and payday lenders.
Executive Compensation and Corporate Governance: Provides shareholders with a say on pay and corporate affairs with a non-binding vote on executive compensation and golden parachutes.
Protects Investors: Provides tough new rules for transparency and accountability for credit rating agencies to protect investors and businesses.
Enforces regulations on the Books: Strengthens oversight and empowers regulators to aggressively pursue financial fraud, conflicts of interest and manipulation of the system that benefits special interests at the expense of American families and businesses.
These different aims are to be achieved by different measures, which shall be covered in further posts.
Ends Too Big to Fail Bailouts: Ends the possibility that tax-payers will be asked to write a check to bail out financial firms that threaten the economy by: creating a safe way to liquidate failed financial firms; imposing tough new capital and leverage requirements that make it undesirable to get too big; updating the Fed's authority to allow system-wide support but no longer prop up individual firms; and establishing rigorous standards and supervision to protect the economy and American consumers, investors and businesses.
Advance Warning System: Creates a council to identify and address systemic risks posed by large, complex companies, products, and activities before they threaten the stability of the economy.
Transparency and accountability for exotic instruments: Eliminates loopholes that allow risky and abusive practices to go on unnoticed and unregulated---including loopholes for over-the-counter derivatives, asset-backed securities, hedge funds, mortgage brokers and payday lenders.
Executive Compensation and Corporate Governance: Provides shareholders with a say on pay and corporate affairs with a non-binding vote on executive compensation and golden parachutes.
Protects Investors: Provides tough new rules for transparency and accountability for credit rating agencies to protect investors and businesses.
Enforces regulations on the Books: Strengthens oversight and empowers regulators to aggressively pursue financial fraud, conflicts of interest and manipulation of the system that benefits special interests at the expense of American families and businesses.
These different aims are to be achieved by different measures, which shall be covered in further posts.
