Wilmington University Changes to The Dodd Frank Act Discussion

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Economics

Wilmington University

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The original paper is attached along with the professors comments. OK to rewrite within the paremeters of the professors comments.


Changes to the Dodd-Frank financial regulation law

This paper will discuss the 2018 roll back of some of the Dodd-Frank financial regulation law which could potentially allow for a repeat of the 2008 global financial crisis.I will discuss the effects that it will have on as it has affected the housing markets and the changes in the lending interest rates as well as the effect on global economic activity and the rise in unemployment and what to do to prevent a future crisis.

You must present a problem that you will solve. Simply discussing items is not enough. In the first paragraph you need to clearly define the issue/problem that you will solve. In the draft paper and deeper in the final paper, you will lay out how you and a team will really solve this in the real world.

With respect to Dodd-Frank, what is the particular issue that is causing the most pain for you? Since Dodd-Frank was watered down by the current administration by changing the law, it seems obvious that the way to fix the current version of the law is to _______. How would you go about doing that?

  1. Paper must be analytic. Meaning one must combine research on the topic to define a problem and the key stakeholders harmed by the problem, explore the scope of the issue/problem, and provide recommendation and implementation plan. This can only be accomplished through analysis/examination of the issue or problem.
  2. Solely describing the issue/problem and/or the history of the issue/problem is insufficient. For example, writing on the history of the two most recent U.S. recessions is not an acceptable topic.
  3. Primary business sources must be used. Here is a recommended list of trade publications that are acceptable (this is not an inclusive list).
  4. APA format must be used. The best sources for APA include the OWL APA website and the Wilmington University APA resources.

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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 12 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. CHANGES TO THE DODD-FRANK ACT 9 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 Commented [Dr Labo51]: Delete the extraneous space 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. CHANGES TO THE DODD-FRANK ACT 10 The rollback of the Act would mean that the federal insurance office would not exist and Commented [Dr Labo53]: Delete the extraneous space 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 Commented [Dr Labo55]: Delete the extraneous space 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 Commented [Dr Labo56]: Delete the extraneous space while keeping the 0,.5” indent. CHANGES TO THE DODD-FRANK ACT 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 Commented [Dr Labo57]: Delete the extraneous space 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. Commented [Dr Labo58]: Delete the extraneous space while keeping the 0,.5” indent. CHANGES TO THE DODD-FRANK ACT 12 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. Commented [Dr Labo59]: Delete the extraneous space while keeping the 0,.5” indent. CHANGES TO THE DODD-FRANK ACT 13 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 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/ 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 14 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 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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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

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Introduction
The Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted on July
21st, 2010 to overhaul the United States’ financial regulatory system as mitigation against
another possible financial crisis 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. Senators Chris Dodd and Barney Frank were 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. This paper proposes a
change to the Dodd-Frank Act in efforts to loosen the strictness so that the regulations of the
banking system can become more stable through presenting a policy change with the Volcker
Rule.
This could be done through revising the policy changes of the Volcker Rule so that the
banking system can become more efficient in stabilizing the economy and given the banks the
abilities in marketing and underwriting their limitations. This revision policy to the Volcker Rule
would also allow for an expansion of liquidity management through the trading of administrative
purposes (Rapperport & Flitter, 2018). The liquidity management will be referring to the actions
in which were taken by the banks so that the most appropriate assets were met with the expected
cash on hand.
This policy change will provide an immediate effect on the economic system, given the
formulation of internal risks that can be limited by the banks themselves. This could be done
through a thorough analysis of the calculations based on the variables that would be selected. If
the banks remained in bondage with their self-designed risk limits, the regulators would be able

CHANGES TO THE DODD-FRANK ACT

3

to assume that full compliance has been met and there is a reasonable expectancy of near-term
demands in which would otherwise be restricted. The banks would also not need prior approval
from the regulators when it pertains to the internal risk limits because it would only require a
notification to be sent to them. Concerning Dodd-Frank, the issue 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. Dodd-Frank has since been watered down by
the current administration through numerous changes of the law (Rapperport & Flitter, 2018).
Therefore, a significant concern relies heavily on the future of the law. It becomes evident 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, named for the change of the bill through
the enactment of the Financial Choice Act (Rapperport & Flitter, 2018). This legislation made
significant changes to the provisions 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 Act
was brought about by the enactment of the Economic Growth, Consumer Protection, Regulatory,
and Relief Act that made it 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 DoddFrank Act (Helmore, 2018).

CHANGES TO THE DODD-FRANK ACT

4

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 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 as well as protect the consumers.
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 institutions that have been affected by the changes in the Act,
is the Federal Deposit Insurance Corporation, whose role of monitoring economic 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 o...


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