Chapter EMA, Problem 3CYU

To determine

To state: The main elements of the Dodd frank act.

Explanation of Solution

Dodd-Frank act is a rule that was passed by the country U’s Congress in reply to financial industry conduct that led to the financial crises of 2007-08. This is also known as the Dodd-Frank Wall Street Reform and the Consumer Protection Act.

It wanted to make the country U’s financial system a safe platform for taxpayers and consumers.

The main elements of the Dodd-Frank act are:

1. Financial stability: Under this, the financial stability of major financial firms is monitored. This is being monitored by the Orderly Liquidation Authority and the oversight council. The failure of these big financial firms could have a severe negative impact on the economy of the country U. This law provides for restructurings or liquidations through the Orderly Liquidation Fund.
This fund was constructed to help with the disassembling of financial companies that have been located in receivership to avoid tax dollars from being used to prop up such firms.

2. Consumer Financial Protection Bureau: This was constructed under the Dodd-Frank act, and was given the work of stopping predatory mortgage lending and assisting customers to comprehend the terms of a mortgage before approving it. 
3. Volcker Rule: This rule limits how the banks can invest, eliminates propriety trading, and limits speculative trading.
Banks are not permitted to be involved with private equity firms or hedge funds which are measured as too risky. To reduce possible conflicts of interest, financial firms are not permitted to trade proprietarily without adequate "skin in the game.”

4. Securities and Exchange Commission (SEC): Dodd-Frank developed the SEC Office of Credit Ratings as credit rating agencies had been blamed for giving dishonestly favorable investment ratings which lead to the financial crisis.

The office is responsible for making sure that agencies provide reliable and meaningful credit ratings of the municipalities, businesses, and other entities that they assess.

Economics Concept Introduction

Introduction:

Dodd-Frank Act: It is a rule that was passed by the country U’s Congress in reply to financial industry conduct that led to the financial crises of 2007-08. This is also known as the Dodd-Frank Wall Street Reform and the Consumer Protection Act.

It wanted to make the country U’s financial system a safe platform for taxpayers and consumers.