Running Head: CHANGES TO THE DODD-FRANK ACT
Changes to the Dodd-Frank Act.
Renee Randall
Wilmington University
August 4, 2019
1
CHANGES TO THE DODD-FRANK ACT
2
Introduction
The Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted in July
21st, 2010 to overhaul the United States’ financial regulatory system as mitigation against
another possible financial crisis as that which was witnessed between 2007 and 2008. The law
made changes to the role of federal financial regulatory bodies as well as the obligations of the
United States financial service sector. President Barack Obama was responding to the call to
initiate reforms in the country’s ailing financial sector. After its implementation, the law
reorganized the financial regulatory system of the United States by eliminating the Thrift
Supervision Office and giving the Federal Deposit Insurance Corporation more responsibility.
Concerning Dodd-Frank, the particular issue that is causing the most pain is the fact that
many financial institutions are against some portions of the Act and the Republican Congress
believe that the Act should be repealed. Conversely, Dodd-Frank has since been watered down
by the current administration through numerous changes I of the law. There is, therefore, a major
concern over the future of the law. However, it seems obvious that the way to fix the current
version of the law is to protect the consumer of the financial sector from financial misconduct,
fraud, and abuse attributed to all forms of financial products, mortgages, and credit cards.
The rollback of the Act
By February 2017, there was a public debate on whether to make changes on the law
with many Republicans calling for either a total or partial repeal of the law. By June 9th, 2017,
the Republicans through the influence of President Trump called for the change of the law
through the enactment of the Financial Choice Act (New York Times (nd). This legislation made
significant changes to the very critical provision of the Dodd-frank Act after it was passed by
233 legislatures against 188 who opposed the bill. Another significant change to the Dodd-Frank
CHANGES TO THE DODD-FRANK ACT
3
Act was brought about by the enactment of the Economic Growth, Consumer Protection,
Regulatory, and Relief Act that made it optional for U.S banks and other financial institution to
comply with the Dodd-Frank Act. After its passage by the House of Representatives on Mya
22nd 2018, President Trump signed the bill and it became operational as a law that brought partial
repel to the Dodd-Frank Act (Helmore, 2018).
The original Act had 16 titles requiring regulators to enact 243 regulations, undertake 67
studies and provide 22 reports periodically. The objective of this Act was to improve
transparency and accountability in among U.S financial institutions, thereby promoting the
financial stability of the country (Helmore, 2018). It also aimed at protecting the consumers of
financial services and products from the financial institutions who had engaged in abusive and
fraudulent practices to exploit their customers.
Implications of the Rollback of the Act
The partial repeal of the Dodd-Frank Wall Street Reform and Consumer Protection Act
established powers and transferred powers to facilitate the regulatory framework of the country’s
financial sector. Among the major institution that has been affected by the changes in the Act is
the Federal Deposit Insurance Corporation whose role of monitoring financial systems has been
altered (Rappeport & Flitter, 2018). The Securities and Exchange Commission of the U.S (SEC)
has also been given new powers transferred from other agencies while the Comptroller of the
Currency has been given new mandate in overseeing the country’s financial regulatory system.
The Federal Reserve (Fed) has been allocated additional roles while the Securities
Investor Protection Corporation (SIPC). A significant change in the law is the elimination of the
role of thrift supervision by transferring its funcions to the FED, FDIC, and Comptroller. From
the practical implication point of view, this rollback will potentially create a financial crisis that
CHANGES TO THE DODD-FRANK ACT
4
was witnessed between 2007 and 2008. It is important to note that before the Dodd-Frank Act
was enacted in 2010, there were exemptions for investment advisers who were not under any
obligation to register their activities and operations with the US SEC in case they deal with less
than 15 clients within the past 12 months of their operations (Rushe, 2017).
Besides, private investment advisers who never held themselves out generally to the
general public purporting to provide investment advice were exempted from registering with the
SEC. However, the Dodd-Frank Act eliminated this exemption which was thought to be a major
recipe for the fraud, exploitation, and financial abuse by the said investments advisers
(Ackerman & Rubin, 2019). With the rollback of the Act through the partial repeal of some
provisions, the outcome would force the investment advisers, and private equity entities, and
hedge funds to seek a fresh registration with the SEC regulator.
The implication of the rollback of the Dodd-frank Act would imply that certain nonbank
entities providing financial services together with their subsidiaries will be placed under the
regulation and supervision of the FED. Further, FED will recognize these nonbank financial
institutions as bank holding companies even though they are not registered to provide banking
services (Jenkins, 2018). This would mean that many loopholes that led to the financial crisis of
2007 and 2008 would be reopened, thereby leading to a second financial crisis.
The rollback of the Dodd-Frank Act creates new agencies, merges, and remove other
agencies. Therefore compromising the efforts that the Act had already initiated to streamline the
regulatory process. The rollback would mean that the financial regulatory system would go back
to its initial state before the stringent regulatory requirements were put in place. Conversely,
there is a high probability that the country may face another financial crisis as was the case
between 2007 and 20008 (The Economist (nd).While the Act increased the oversight of financial
CHANGES TO THE DODD-FRANK ACT
5
entities, the rollback is regarded as a recipe for systemic risk. The attempt to amend the Federal
Reserve Act is likely to deal a blow to the accountability of the financial institutions, thereby
eliminating the transparency requirement and obligation of these firms.
The Dodd-Frank Act intended to provide rigorous standards, accountability, supervision,
and transparency in the U.S. financial system, the rollback of Act will compromise the protection
of the United States economy and consumers of financial products and services (BBC, 2018a).
Besides, the rollback of the Act would expose the American consumers, business personalities,
and investors to risk of losing their fortune to fraudsters and untrustworthy individuals. Also, the
rollback would lead to an end to the bailouts for financial institutions which are funded by
taxpayers.
The rollback of the Act would mean that the country would not have an advanced
warning system to caution its citizens, especially those seeking products and services from the
financial sector of the impending vulnerabilities that may interfere with the stability of the
country’s economy (BBC, 2018b). As such, there is a high likelihood that many investors would
have lost their investment in financial institutions for lack of caution and early warning. Besides,
the rollback of the Act would mean that there would be no rules to guide on how the country can
implement executive compensation and take the role of supervising the corporate governance in
the country.
The loopholes in the financial system of the United States that encouraged the fraud and
exploitation of financial service customers leading to the 2008 economic recession would
reemerge. The explicit power given to the new agencies to undertake regulations and supervision
of the country's financial players would also be impaired. The move to transfer powers from
other agencies and merging such powers with other institutions and agencies (Dexheimer, 2018).
CHANGES TO THE DODD-FRANK ACT
6
The rollback of the Act would also mean that the financial institutions and players would escape
from the current obligation and requirement to report to Congress annually. Conversely, the
report on the current plans as well as the future goals of the financial institutions would not be
available, thereby compromising the accountability, integrity, and transparency requirements of
the country’s financial system (Economist (nd).
While the Act created new agencies such as the Office of Financial Research, the
Financial Stability Oversight Council, and the Bureau of Consumer Financial Protection, the
rollback of the Act would mean that role played by these federal financial regulatory agencies
would be eliminated. In particular, the rollback of the Act would lead to the elimination of the
Office of Thrift Supervision by creating the Office of Financial Research and the FSOC (Donna,
2018). The future of America's financial markets would probably be compromised, causing
unnecessary fear and tension among the consumers of financial services.
Another possible implication of the rollback of the Act is that Wall Street will no longer
be under any watch, regulation, and supervisions, opening up more opportunities for exploitation
of financial service consumers the Financial Stability Oversight Council would not be capable of
identifying the risks affecting the country’s financial industry. Even those firms that become too
big for FSOC would not be effectively supervised by the Federal Reserve because of some
loopholes that would be created in the rollback of the Act (Donna, 2017). Besides, the reserve
requirements that would prevent bankruptcy among banking institutions may not be
implemented should the Act be rolled back (The Economist, 2018). In particular, the protection
of whistleblowers would not exist and many whistleblowers would not caution the consumers
and the general public about the impending financial instability.
CHANGES TO THE DODD-FRANK ACT
7
The rollback of the Act would mean that the federal insurance office would not exist and
this there would be no more checks on the giant insurance corporation that holds a key to the
country's financial stability. Some insurance entities that pose a great risk to the country’s
financial stability would not be effectively regulated, thereby posing a great threat to the country
as a whole (Geisst, 2018). The impact of this rollback would mean that the country’s insurance
sector would be under the risks of global reinsurance market fluctuations. There is a high
possibility that the rollback of the Act would allow banks to gamble with the money of their
customers and other depositors (Warren, 2017). Since the Act through the Volcker rule prohibits
banks from engaging in hedging funds to maximize their profits, the rollback would mean that
banks can easily exploit the window and inappropriately use such deposits as hedge funds.
The rollback of the Act would also incapacitate the SEC as far as monitoring risky
derivatives is concerned. Even the Commodities Future Trading Commission would not be in a
position to regulate the derivatives that are perceived to be very risky and dangerous for the
financial stability of the country’s financial sector (Helmore, 2017). Therefore, the policy-makers
would not be in a position to enact policies that would otherwise prevent the possibility of the
country facing another financial crisis as was the case in 2007 and 2008.
There is a high probability of the country facing another financial crisis like the 20072008 crisis with the rollback of the Act, given the fact that SEC would not force financial
institutions to register their hedge funds (Werner, 2018). Conversely, trading activities on the
hedge funds would remain in the dark, further exposing the investors and depositors to more
risks of a financial crisis. Credit rating agencies would also operate at free will without any
proper oversight and regulation (Helmore, 2018). The office of credit ratings under the SEC
CHANGES TO THE DODD-FRANK ACT
8
would no longer be functional, thus exposing the country’s financial system to another crisis
should the rating agencies declare certain derivatives as safe even in case they are not.
In the current provision, the Act creates a consumer financial protection bureau to cater
for the interests and need of the customers by regulating the mortgages, loans, and credit card
usage. The rollback of this Act would, therefore, mean that the many watchdog agencies that
have been merged would not be in a position to oversee credit reporting agencies and enforce the
verification of borrowers’ level of income, job status, or credit history (Passy, 2018). Another
possible implication of the rollback of the Act is the exemption of some loan companies from a
particular portion of the Act that requires the banks to provide full disclosure of their funds in
compliance with the Home Mortgage Disclosure Act.
It is important to note that a financial institution was never ready for government
regulation before the 2007-208 financial crisis. Therefore the rollback of the Dodd-Frank Act
would mean that the banks would be free from supervisions and regulation and no longer be
classified as too big to fail (Rappeport & Flitter, 2018). They would also use credit default swaps
and hedge funds as derivatives yet these are the dangerous derivatives which caused the
subprime mortgage crisis would no longer be registered with SEC.
Conclusion
The Dodd-Frank Act was enacted in response to the critical issues that were believed to
have caused the 2007-2008 financial crisis. It was, therefore, a remedy to the financial system
responsible for the financial crisis and targeted specifically the accountability and transparency
of financial institutions. However, the implementation of the law stills remains unclear with the
majority of the financial institutions and legislatures criticizing the law, arguing that the new
institutions created by the Act have caused too much burden to small financial institutions.
CHANGES TO THE DODD-FRANK ACT
9
Therefore, there has been a huge support for the rollback of the Act to improve the
competitiveness of US banks with foreign financial institutions. The political pressure prompted
Congress to pass a law in 2018 that rolled back some of the restrictions and regulations of DoddFrank on finical institutions.
The rollback of Dodd-Frank was occasioned by the numerous complaints from a
financial institution and banks who claimed that the regulations were too harsh for small
financial institutions. The passage of the Rollback of the rules by the Congress on Mya 22nd 2018
paved way for the regulatory relief, economic growth, and consumer protection Act. This
rollback eased the regulations of the small banks with assets falling between $100 billion and
$250 billion. It is important to note that the rollback of the Act implies that FED would not be in
a position to refer to the small banks as too big to fail. Therefore, the banks would not be forced
to hold huge cash reserves to mitigate gains possible loss that customs may suffer in case of a
cash crunch. Besides, there would be no stress tests by FED on these small banks, leaving only
12 big banks in the United States to comply with this provision of the Act.
CHANGES TO THE DODD-FRANK ACT
10
References
Ackerman A. and Rubin T. Gabriel (June 10, 2019). Rewrite of Bank Rules Advances Slowly,
Frustrating Republicans. Wall Street Journal. Accessed on 2nd August 2019 from
https://www.wsj.com/articles/rewrite-of-bank-rules-bogs-down-11560159001
BBC (15 March 2018a). Financial crisis rules for banks eased by the US Senate. BBC. Accessed
on 2nd August 2019 from https://www.bbc.com/news/business-43409985
BBC (23 May 2018b). US to ease crisis-era Dodd-Frank banking rules. BBC. Accessed on 2nd
August 2019 from https://www.bbc.com/news/business-44218808
New York Times (nd). Congress passes Dodd-Frank rollback for smaller banks. New York
Times. Accessed on 2nd August 2019 from
https://www.nytimes.com/2018/05/22/business/congress-passes-dodd-frank-rollback-forsmaller-banks.html
Dexheimer E. (May 23, 2018). Sweeping Overhaul of Bank Rules Clears U.S. House.
Bloomberg. Accessed on 2nd August 2019 from
https://www.bloomberg.com/news/articles/2018-05-22/biggest-bank-rule-rollback-sincedodd-frank-is-approved-by-house
Donna B. (19th February 2018). Small banks near big win on Dodd-Frank rollback. CNN.
Accessed on 2nd August 2019 from
https://money.cnn.com/2018/02/19/news/companies/dodd-frank-senate-crapobill/index.html
Donna B. (April 21, 2017) Trump signs orders that take aim at Dodd-Frank. Accessed on 2nd
August 2019 from https://money.cnn.com/2017/04/21/news/trump-executive-order-taxes/
CHANGES TO THE DODD-FRANK ACT
11
Economist (nd). America’s Dodd-Frank Act gets a tweak, not a rewrite. The Economist.
Accessed on 2nd August 2019 from. https://www.economist.com/finance-andeconomics/2018/05/24/a-rare-bipartisan-moment-allows-a-timid-rollback-of-bankingregulation
Geisst C. (March 26, 2018).Rolling back Dodd-Frank could put big banks at risk. CNN.
Accessed on 2nd August 2019 from
https://money.cnn.com/2018/03/26/news/economy/dodd-frank-opinion/index.html
Helmore E. Sun 25 Jun 2017). Trump could use alternate routes to roll back bank reforms. The
Guardian. Accessed on 2nd August 2019 from
https://www.theguardian.com/business/2017/jun/25/trump-banking-reforms-dodd-frankfinancial-crisis
Helmore E.(23rd May 2018). US Congress passes partial Dodd-Frank rollback in move to
deregulate banking. The Guardian. Accessed on 2nd August 2019 from
https://www.theguardian.com/us-news/2018/may/22/congress-passes-partial-dodd-frankrollback-trump
Jenkins C. (May 21st, 2018). Opinion today: Don't roll back Dodd-Frank. Financial Times.
Accessed on 2nd August 2019 from https://www.ft.com/content/d2a88a50-5ca9-11e89334-2218e7146b04
Passy J (Mar 20, 2018). How the rollback of Obama-era financial regulations could affect you.
Market Watch. Accessed on 2nd August 2019 from
https://www.marketwatch.com/story/how-the-rollback-of-the-obama-era-financialregulations-affects-you-2018-03-19
CHANGES TO THE DODD-FRANK ACT
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Rappeport A and Flitter E. (May 22, 2018). Congress passes Dodd-Frank Rollback for smaller
banks. New York Times. Accessed on 2nd August 2019 from
https://www.nytimes.com/2018/05/22/business/congress-passes-dodd-frank-rollback-forsmaller-banks.html
Rushe D. (Friday 3rd February 2017). Trump orders Dodd-Frank review in effort to roll back
financial regulation. The Guardian. Accessed on 2nd August 2019 from
https://www.theguardian.com/us-news/2017/feb/03/trump-dodd-frank-act-executiveorder-financial-regulations
The Economist (May 24th, 2018). A rare bipartisan moment allows a timid rollback of banking
regulation. Accessed on 2nd August 2019 from https://www.economist.com/finance-andeconomics/2018/05/24/a-rare-bipartisan-moment-allows-a-timid-rollback-of-bankingregulation
Warren E. (7 March 2017). US looks to loosen Dodd-Frank crisis-era banking rules. BBC.
Accessed on 2nd August 2019 from https://www.bbc.com/news/business-43321236
Werner Erica (May 24th, 2018). Trump signs law rolling back post-financial crisis banking rules.
Washington Post. Accessed on 2nd August 2019 from
https://www.washingtonpost.com/business/economy/trump-signs-law-rolling-back-postfinancial-crisis-banking-rules/2018/05/24/077e3aa8-5f6c-11e8-a4a4c070ef53f315_story.html
Running Head: CHANGES TO THE DODD-FRANK ACT
1
Changes to the Dodd-Frank Act.
Renee Randall
Wilmington University
August 4, 2019
Grading criteria: research draft
Maximum
Points
(1) Topic working title and short description of key issue, 2 -3
paragraphs
This is a description of the changes to the Dodd-Frank Act;
this is not a description of a problem with the current act that
needs to be solved.
(2) A completed outline that will guide you in your work for the
final paper. Do NOT use Word’s outline feature
No outline. See the syllabus. See the amplification in the July
16 announcement.
3/5
0/5
CHANGES TO THE DODD-FRANK ACT
2
(3) Two paragraphs for each section of the paper: 4 items
i.
A problem, question or issue bearing on U.S. financial
markets and institutions that is historically significant or currently
important.
ii.
research that demonstrates the validity and applicability of
the problem, question or issue in the field.
iii.
a solution to the problem, question or issue or, if no
solution is available, a discussion of alternatives that may be
utilized.
2.5/5
iv.
quantitative data specific and relevant to the problem,
question, or issue.
There is no solution proposed.
There is one sentence in this paper that contains financial
information.
(4) Description of and/or examples of financial data used to
support narrative analysis
There are only two financial numbers in one sentence.
This rollback eased the regulations of the small banks with assets
falling between $100 billion and $250 billion.
0.5/5
What is the financial basis for the paper?
(5) A minimum of 8 cited research sources relevant to the topic
and from acceptable sources
5/5
(6) Perfect spelling, punctuation, grammar; APA where needed;
concise business-style writing*
*mistakes of this nature repeated throughout the research paper
could result in a greater than 5% deduction
There are many writing errors. I stopped reviewing them
because of the quantity.
0.5/5
I gave similar comments on discussion boards.
See the Wilmington University Student Success Center to get
writing assistance.
https://www.wilmu.edu/ssc/
(302) 356–6995
ssc@wilmu.edu
Total
11.5/30
CHANGES TO THE DODD-FRANK ACT
3
CHANGES TO THE DODD-FRANK ACT
4
CHANGES TO THE DODD-FRANK ACT
5
Introduction
The Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted in July
Commented [Dr Labo1]: Spelling
21st, 2010 to overhaul the United States’ financial regulatory system as mitigation against
another possible financial crisis as that which was witnessed between 2007 and 2008. The law
Commented [Dr Labo2]: Delete. Doesn’t say anything,.
made changes to the role of federal financial regulatory bodies as well as the obligations of the
Commented [Dr Labo3]: It was not witnessed.
Witnessing implies that an unbiased observer saw
something from the sidelines without being involved.
United States financial service sector. President Barack Obama was responding to the call to
Commented [Dr Labo4]: Senators Chris Dodd and
Barney Frank were
initiate reforms in the country’s ailing financial sector. After its implementation, the law
reorganized the financial regulatory system of the United States by eliminating the Thrift
Supervision Office and giving the Federal Deposit Insurance Corporation more responsibility.
Concerning Dodd-Frank, the particular issue that is causing the most pain is the fact that
Commented [Dr Labo5]: Delete. Doesn’t say anything.
many financial institutions are against some portions of the Act and the Republican Congress
believe that the Act should be repealed. Conversely, Dodd-Frank has since been watered down
Commented [Dr Labo6]: Singular/plural mix
by the current administration through numerous changes I of the law. There is, therefore, a major
Commented [Dr Labo7]: Conversely implies opposite,
but these are consistent statements. Choose.
concern over the future of the law. However, it seems obvious that the way to fix the current
Commented [Dr Labo8]: What does this mean?
version of the law is to protect the consumer of the financial sector from financial misconduct,
fraud, and abuse attributed to all forms of financial products, mortgages, and credit cards.
The rollback of the Act
By February 2017, there was a public debate on whether to make changes on the law
Commented [Dr Labo9]: Incomplete sentence. The term
however joins two parts of a sentence, but there is nothing
before it.
Commented [Dr Labo10]: Delete the extraneous space
while keeping the 0,.5” indent.
with many Republicans calling for either a total or partial repeal of the law. By June 9th, 2017,
Commented [Dr Labo11]: Insert comma
the Republicans through the influence of President Trump called for the change of the law
Commented [Dr Labo12]: Insert comma
through the enactment of the Financial Choice Act (New York Times (nd). This legislation made
Commented [Dr Labo13]: The article has authors’ names
and a date.
significant changes to the very critical provision of the Dodd-frank Act after it was passed by
Commented [Dr Labo14]: “Very Critical” does not say
anything. Be specific.
233 legislatures against 188 who opposed the bill. Another significant change to the Dodd-Frank
Commented [Dr Labo15]: Barney Frank deserves to
have his name capitalized.
Commented [Dr Labo16]: Was this along party lines?
CHANGES TO THE DODD-FRANK ACT
6
Act was brought about by the enactment of the Economic Growth, Consumer Protection,
Regulatory, and Relief Act that made it optional for U.S banks and other financial institution to
comply with the Dodd-Frank Act. After its passage by the House of Representatives on Mya
22nd 2018, President Trump signed the bill and it became operational as a law that brought partial
Commented [Dr Labo17]: It did not make it optional.
Optional implies that it does not apply. There were some
sections that compliance was restricted so be specific in
identifying them.
Commented [Dr Labo18]: Spelling.
Commented [Dr Labo19]: Two spaces; delete one.
repel to the Dodd-Frank Act (Helmore, 2018).
The original Act had 16 titles requiring regulators to enact 243 regulations, undertake 67
studies and provide 22 reports periodically. The objective of this Act was to improve
transparency and accountability in among U.S financial institutions, thereby promoting the
Commented [Dr Labo20]: Spelling
Commented [Dr Labo21]: Extra words that don’t say
anything. Delete.
Commented [Dr Labo22]: Spelling.
Commented [Dr Labo23]: Delete the extraneous space
while keeping the 0,.5” indent.
Commented [Dr Labo24]: Spelling
financial stability of the country (Helmore, 2018). It also aimed at protecting the consumers of
financial services and products from the financial institutions who had engaged in abusive and
fraudulent practices to exploit their customers.
Implications of the Rollback of the Act
The partial repeal of the Dodd-Frank Wall Street Reform and Consumer Protection Act
Commented [Dr Labo25]: The CFPB, now the Bureau of
Consumer Protection, was enacted to protect consumer not
just those exploited by financial institutions.
Commented [Dr Labo26]: Delete the extraneous space
while keeping the 0,.5” indent.
established powers and transferred powers to facilitate the regulatory framework of the country’s
financial sector. Among the major institution that has been affected by the changes in the Act is
the Federal Deposit Insurance Corporation whose role of monitoring financial systems has been
altered (Rappeport & Flitter, 2018). The Securities and Exchange Commission of the U.S (SEC)
Commented [Dr Labo27]: Spelling
Commented [Dr Labo28]: Spelling,
Commented [Dr Labo29]: Spelling
has also been given new powers transferred from other agencies while the Comptroller of the
Currency has been given new mandate in overseeing the country’s financial regulatory system.
The Federal Reserve (Fed) has been allocated additional roles while the Securities
Commented [Dr Labo30]: Grammar
Commented [Dr Labo31]: Delete the extraneous space
while keeping the 0,.5” indent.
Investor Protection Corporation (SIPC). A significant change in the law is the elimination of the
Commented [Dr Labo32]: Incomplete sentence.
role of thrift supervision by transferring its funcions to the FED, FDIC, and Comptroller. From
Commented [Dr Labo33]: Spelling.
the practical implication point of view, this rollback will potentially create a financial crisis that
CHANGES TO THE DODD-FRANK ACT
7
was witnessed between 2007 and 2008. It is important to note that before the Dodd-Frank Act
was enacted in 2010, there were exemptions for investment advisers who were not under any
obligation to register their activities and operations with the US SEC in case they deal with less
than 15 clients within the past 12 months of their operations (Rushe, 2017).
Besides, private investment advisers who never held themselves out generally to the
Commented [Dr Labo34]: Spelling
Commented [Dr Labo35]: Grammar
Commented [Dr Labo36]: Delete the extraneous space
while keeping the 0,.5” indent.
general public purporting to provide investment advice were exempted from registering with the
SEC. However, the Dodd-Frank Act eliminated this exemption which was thought to be a major
Commented [Dr Labo37]: Run-on sentence.
recipe for the fraud, exploitation, and financial abuse by the said investments advisers
Commented [Dr Labo38]: Be specific.
(Ackerman & Rubin, 2019). With the rollback of the Act through the partial repeal of some
provisions, the outcome would force the investment advisers, and private equity entities, and
Commented [Dr Labo39]: Delete, extra word does not
say anything.
hedge funds to seek a fresh registration with the SEC regulator.
The implication of the rollback of the Dodd-frank Act would imply that certain nonbank
entities providing financial services together with their subsidiaries will be placed under the
regulation and supervision of the FED. Further, FED will recognize these nonbank financial
institutions as bank holding companies even though they are not registered to provide banking
Commented [Dr Labo40]: Delete the extraneous space
while keeping the 0,.5” indent.
Commented [Dr Labo41]: Honor Barney by capitalizing
his last name.
Commented [Dr Labo42]: Run-on sentence.
Commented [Dr Labo43]: Grammat.
services (Jenkins, 2018). This would mean that many loopholes that led to the financial crisis of
2007 and 2008 would be reopened, thereby leading to a second financial crisis.
The rollback of the Dodd-Frank Act creates new agencies, merges, and remove other
Commented [Dr Labo44]: Delete the extraneous space
while keeping the 0,.5” indent.
agencies. Therefore compromising the efforts that the Act had already initiated to streamline the
Commented [Dr Labo45]: Spelling
regulatory process. The rollback would mean that the financial regulatory system would go back
Commented [Dr Labo46]: Incomplete sentence
to its initial state before the stringent regulatory requirements were put in place. Conversely,
there is a high probability that the country may face another financial crisis as was the case
between 2007 and 20008 (The Economist (nd).While the Act increased the oversight of financial
Commented [Dr Labo47]: End of detailed writing check.
CHANGES TO THE DODD-FRANK ACT
8
entities, the rollback is regarded as a recipe for systemic risk. The attempt to amend the Federal
Reserve Act is likely to deal a blow to the accountability of the financial institutions, thereby
eliminating the transparency requirement and obligation of these firms.
The Dodd-Frank Act intended to provide rigorous standards, accountability, supervision,
Commented [Dr Labo48]: Delete the extraneous space
while keeping the 0,.5” indent.
and transparency in the U.S. financial system, the rollback of Act will compromise the protection
of the United States economy and consumers of financial products and services (BBC, 2018a).
Besides, the rollback of the Act would expose the American consumers, business personalities,
and investors to risk of losing their fortune to fraudsters and untrustworthy individuals. Also, the
rollback would lead to an end to the bailouts for financial institutions which are funded by
taxpayers.
The rollback of the Act would mean that the country would not have an advanced
Commented [Dr Labo49]: Delete the two extraneous
spaces.
warning system to caution its citizens, especially those seeking products and services from the
financial sector of the impending vulnerabilities that may interfere with the stability of the
country’s economy (BBC, 2018b). As such, there is a high likelihood that many investors would
have lost their investment in financial institutions for lack of caution and early warning. Besides,
the rollback of the Act would mean that there would be no rules to guide on how the country can
implement executive compensation and take the role of supervising the corporate governance in
the country.
The loopholes in the financial system of the United States that encouraged the fraud and
exploitation of financial service customers leading to the 2008 economic recession would
reemerge. The explicit power given to the new agencies to undertake regulations and supervision
of the country's financial players would also be impaired. The move to transfer powers from
other agencies and merging such powers with other institutions and agencies (Dexheimer, 2018).
Commented [Dr Labo50]: Delete the extraneous space
while keeping the 0,.5” indent.
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The rollback of the Act would also mean that the financial institutions and players would escape
from the current obligation and requirement to report to Congress annually. Conversely, the
report on the current plans as well as the future goals of the financial institutions would not be
available, thereby compromising the accountability, integrity, and transparency requirements of
the country’s financial system (Economist (nd).
While the Act created new agencies such as the Office of Financial Research, the
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while keeping the 0,.5” indent.
Financial Stability Oversight Council, and the Bureau of Consumer Financial Protection, the
rollback of the Act would mean that role played by these federal financial regulatory agencies
would be eliminated. In particular, the rollback of the Act would lead to the elimination of the
Office of Thrift Supervision by creating the Office of Financial Research and the FSOC (Donna,
2018). The future of America's financial markets would probably be compromised, causing
unnecessary fear and tension among the consumers of financial services.
Another possible implication of the rollback of the Act is that Wall Street will no longer
be under any watch, regulation, and supervisions, opening up more opportunities for exploitation
of financial service consumers the Financial Stability Oversight Council would not be capable of
identifying the risks affecting the country’s financial industry. Even those firms that become too
big for FSOC would not be effectively supervised by the Federal Reserve because of some
loopholes that would be created in the rollback of the Act (Donna, 2017). Besides, the reserve
requirements that would prevent bankruptcy among banking institutions may not be
implemented should the Act be rolled back (The Economist, 2018). In particular, the protection
of whistleblowers would not exist and many whistleblowers would not caution the consumers
and the general public about the impending financial instability.
Commented [Dr Labo52]: Delete the extraneous space
while keeping the 0,.5” indent.
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The rollback of the Act would mean that the federal insurance office would not exist and
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while keeping the 0,.5” indent.
this there would be no more checks on the giant insurance corporation that holds a key to the
country's financial stability. Some insurance entities that pose a great risk to the country’s
Commented [Dr Labo54]: Two spaces; delete one.
financial stability would not be effectively regulated, thereby posing a great threat to the country
as a whole (Geisst, 2018). The impact of this rollback would mean that the country’s insurance
sector would be under the risks of global reinsurance market fluctuations. There is a high
possibility that the rollback of the Act would allow banks to gamble with the money of their
customers and other depositors (Warren, 2017). Since the Act through the Volcker rule prohibits
banks from engaging in hedging funds to maximize their profits, the rollback would mean that
banks can easily exploit the window and inappropriately use such deposits as hedge funds.
The rollback of the Act would also incapacitate the SEC as far as monitoring risky
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while keeping the 0,.5” indent.
derivatives is concerned. Even the Commodities Future Trading Commission would not be in a
position to regulate the derivatives that are perceived to be very risky and dangerous for the
financial stability of the country’s financial sector (Helmore, 2017). Therefore, the policy-makers
would not be in a position to enact policies that would otherwise prevent the possibility of the
country facing another financial crisis as was the case in 2007 and 2008.
There is a high probability of the country facing another financial crisis like the 20072008 crisis with the rollback of the Act, given the fact that SEC would not force financial
institutions to register their hedge funds (Werner, 2018). Conversely, trading activities on the
hedge funds would remain in the dark, further exposing the investors and depositors to more
risks of a financial crisis. Credit rating agencies would also operate at free will without any
proper oversight and regulation (Helmore, 2018). The office of credit ratings under the SEC
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11
would no longer be functional, thus exposing the country’s financial system to another crisis
should the rating agencies declare certain derivatives as safe even in case they are not.
In the current provision, the Act creates a consumer financial protection bureau to cater
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while keeping the 0,.5” indent.
for the interests and need of the customers by regulating the mortgages, loans, and credit card
usage. The rollback of this Act would, therefore, mean that the many watchdog agencies that
have been merged would not be in a position to oversee credit reporting agencies and enforce the
verification of borrowers’ level of income, job status, or credit history (Passy, 2018). Another
possible implication of the rollback of the Act is the exemption of some loan companies from a
particular portion of the Act that requires the banks to provide full disclosure of their funds in
compliance with the Home Mortgage Disclosure Act.
It is important to note that a financial institution was never ready for government
regulation before the 2007-208 financial crisis. Therefore the rollback of the Dodd-Frank Act
would mean that the banks would be free from supervisions and regulation and no longer be
classified as too big to fail (Rappeport & Flitter, 2018). They would also use credit default swaps
and hedge funds as derivatives yet these are the dangerous derivatives which caused the
subprime mortgage crisis would no longer be registered with SEC.
Conclusion
The Dodd-Frank Act was enacted in response to the critical issues that were believed to
have caused the 2007-2008 financial crisis. It was, therefore, a remedy to the financial system
responsible for the financial crisis and targeted specifically the accountability and transparency
of financial institutions. However, the implementation of the law stills remains unclear with the
majority of the financial institutions and legislatures criticizing the law, arguing that the new
institutions created by the Act have caused too much burden to small financial institutions.
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while keeping the 0,.5” indent.
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Therefore, there has been a huge support for the rollback of the Act to improve the
competitiveness of US banks with foreign financial institutions. The political pressure prompted
Congress to pass a law in 2018 that rolled back some of the restrictions and regulations of DoddFrank on finical institutions.
The rollback of Dodd-Frank was occasioned by the numerous complaints from a
financial institution and banks who claimed that the regulations were too harsh for small
financial institutions. The passage of the Rollback of the rules by the Congress on Mya 22nd 2018
paved way for the regulatory relief, economic growth, and consumer protection Act. This
rollback eased the regulations of the small banks with assets falling between $100 billion and
$250 billion. It is important to note that the rollback of the Act implies that FED would not be in
a position to refer to the small banks as too big to fail. Therefore, the banks would not be forced
to hold huge cash reserves to mitigate gains possible loss that customs may suffer in case of a
cash crunch. Besides, there would be no stress tests by FED on these small banks, leaving only
12 big banks in the United States to comply with this provision of the Act.
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References
Ackerman A. and Rubin T. Gabriel (June 10, 2019). Rewrite of Bank Rules Advances Slowly,
Frustrating Republicans. Wall Street Journal. Accessed on 2nd August 2019 from
https://www.wsj.com/articles/rewrite-of-bank-rules-bogs-down-11560159001
BBC (15 March 2018a). Financial crisis rules for banks eased by the US Senate. BBC. Accessed
Commented [Dr Labo60]: Here and elsewhere in this
section.
APA format. See the OWL APA Electronics Sources page,
Article From an Online Periodical section.
https://owl.purdue.edu/owl/research_and_citation/apa_sty
le/apa_formatting_and_style_guide/reference_list_electron
ic_sources.html
Note the commas between last and first names, & instead
of and, etc.
on 2nd August 2019 from https://www.bbc.com/news/business-43409985
BBC (23 May 2018b). US to ease crisis-era Dodd-Frank banking rules. BBC. Accessed on 2nd
August 2019 from https://www.bbc.com/news/business-44218808
New York Times (nd). Congress passes Dodd-Frank rollback for smaller banks. New York
Times. Accessed on 2nd August 2019 from
https://www.nytimes.com/2018/05/22/business/congress-passes-dodd-frank-rollback-forsmaller-banks.html
Dexheimer E. (May 23, 2018). Sweeping Overhaul of Bank Rules Clears U.S. House.
Bloomberg. Accessed on 2nd August 2019 from
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Donna B. (19th February 2018). Small banks near big win on Dodd-Frank rollback. CNN.
Accessed on 2nd August 2019 from
https://money.cnn.com/2018/02/19/news/companies/dodd-frank-senate-crapobill/index.html
Donna B. (April 21, 2017) Trump signs orders that take aim at Dodd-Frank. Accessed on 2nd
August 2019 from https://money.cnn.com/2017/04/21/news/trump-executive-order-taxes/
Commented [Dr Labo61]: (1)This is not the authors’
names
(2)There is a date.
See Rappeport A and Flitter below.
CHANGES TO THE DODD-FRANK ACT
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Economist (nd). America’s Dodd-Frank Act gets a tweak, not a rewrite. The Economist.
Accessed on 2nd August 2019 from. https://www.economist.com/finance-andeconomics/2018/05/24/a-rare-bipartisan-moment-allows-a-timid-rollback-of-bankingregulation
Geisst C. (March 26, 2018).Rolling back Dodd-Frank could put big banks at risk. CNN.
Accessed on 2nd August 2019 from
https://money.cnn.com/2018/03/26/news/economy/dodd-frank-opinion/index.html
Helmore E. Sun 25 Jun 2017). Trump could use alternate routes to roll back bank reforms. The
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Helmore E.(23rd May 2018). US Congress passes partial Dodd-Frank rollback in move to
deregulate banking. The Guardian. Accessed on 2nd August 2019 from
https://www.theguardian.com/us-news/2018/may/22/congress-passes-partial-dodd-frankrollback-trump
Jenkins C. (May 21st, 2018). Opinion today: Don't roll back Dodd-Frank. Financial Times.
Accessed on 2nd August 2019 from https://www.ft.com/content/d2a88a50-5ca9-11e89334-2218e7146b04
Passy J (Mar 20, 2018). How the rollback of Obama-era financial regulations could affect you.
Market Watch. Accessed on 2nd August 2019 from
https://www.marketwatch.com/story/how-the-rollback-of-the-obama-era-financialregulations-affects-you-2018-03-19
Commented [Dr Labo62]: See “The Economist” below.
CHANGES TO THE DODD-FRANK ACT
15
Rappeport A and Flitter E. (May 22, 2018). Congress passes Dodd-Frank Rollback for smaller
Commented [Dr Labo63]: See the New York Times entry
above.
banks. New York Times. Accessed on 2nd August 2019 from
https://www.nytimes.com/2018/05/22/business/congress-passes-dodd-frank-rollback-forsmaller-banks.html
Rushe D. (Friday 3rd February 2017). Trump orders Dodd-Frank review in effort to roll back
financial regulation. The Guardian. Accessed on 2nd August 2019 from
https://www.theguardian.com/us-news/2017/feb/03/trump-dodd-frank-act-executiveorder-financial-regulations
The Economist (May 24th, 2018). A rare bipartisan moment allows a timid rollback of banking
regulation. Accessed on 2nd August 2019 from https://www.economist.com/finance-andeconomics/2018/05/24/a-rare-bipartisan-moment-allows-a-timid-rollback-of-bankingregulation
Warren E. (7 March 2017). US looks to loosen Dodd-Frank crisis-era banking rules. BBC.
Accessed on 2nd August 2019 from https://www.bbc.com/news/business-43321236
Werner Erica (May 24th, 2018). Trump signs law rolling back post-financial crisis banking rules.
Washington Post. Accessed on 2nd August 2019 from
https://www.washingtonpost.com/business/economy/trump-signs-law-rolling-back-postfinancial-crisis-banking-rules/2018/05/24/077e3aa8-5f6c-11e8-a4a4c070ef53f315_story.html
Commented [Dr Labo64]: See “Economist” above.
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