Question

Use reliable online resources to research Dodd–Frank Wall Street Reform and Consumer Protection Act, 2010 write a comment about each provision of this comprehensive Financial Reform that relates to real estate activities.

Answer 1

Introduction:

The Dodd-Frank Wall Street Reform and Consumer Protection Act is a massive piece of financial reform legislation passed during the Obama administration in 2010 as a response to the financial crisis of 2008.

The Dodd-Frank Act (fully known as the Dodd-Frank Wall Street Reform and Consumer Protection Act) is a United States federal law that places regulation of the financial industry in the hands of the government. The legislation, which was enacted in July 2010, created financial regulatory processes to limit risk by enforcing transparency and accountability.

Because the Great Recession of the late 2000s was due in part to low regulation and high reliance on large banks, one of the main goals of the Dodd-Frank Act was to subject banks to more stringent regulation. The Act created the Financial Stability Oversight Council (FSOC) to address persistent issues affecting the financial industry and prevent another recession.

By keeping the banking system under a closer watch, the Act seeks to eliminate the need for future taxpayer-funded bailouts. To both ensure cooperation by financial insiders and fight corruption in the financial industry, the Dodd-Frank Act contains a whistleblowing provision to encourage those with original information about security violations to report them to the government. Whistleblowers receive a financial reward.

Key provisions

Key provisions of the Dodd-Frank Act include:

The Volcker Rule, which is aimed at preventing commercial banks from taking part in speculative activities and proprietary trading for profit. Specifically, it limits banks’ investments in private equity funds and hedge funds.

The Consumer Financial Protection Bureau (CFPB) was established as an independent financial regulator to oversee consumer finance markets, including student loans, credit cards, payday loans and mortgages. The CFPB can supervise certain financial companies, write new rules as well as enforce consumer protection laws via fines and other means.

The SEC Office of Credit Ratings ensures that agencies provide reliable credit ratings of the businesses, municipalities and other entities they evaluate.

The whistleblower program established a mandatory bounty program that enables whistleblowers to receive from 10% to 30% of the proceeds from a litigation settlement. In addition, the program broadened the definition of covered employees to include employees of a company’s affiliates and subsidiaries. It also extended the statute of limitations under which whistleblowers can bring forward claims against their employers from 90 days to 180 days after a violation is discovered

KEY TAKEAWAYS

The Dodd-Frank Wall Street Reform and Consumer Protection Act targeted the sectors of the financial system that were believed to have caused the 2008 financial crisis, including banks, mortgage lenders, and credit rating agencies.

Critics of the law argue that the regulatory burdens it imposes could make United States firms less competitive than their foreign counterparts.

In 2018, Congress passed a new law that rolled back some of Dodd-Frank's restrictions.

Some of the KEY COMPONENTS of Reform and Consumer Protection Act are as follows-

1. Financial stability

2. Consumer financial protection bureau

3. The Volcker rule

4. SEC office of credit ratings

5. Whistleblower program

CRITICISM AND ROLLBACK

Critics of Dodd-Frank argued that limiting the risks financial firms can take also limited the growth potential of these institutions, lowering the overall liquidity of the market. They also said that the added regulations hampered smaller financial institutions and community banks.

As a result, Congress passed a rollback of Dodd-Frank rules for these small banks on May 2, 2018. The Economic Growth, Regulatory Relief, and Consumer Protection Act eased regulations on small and midsize banks. Banks with between $100 billion and $250 billion in assets are no longer in the category of “too big to fail” and thanks to the rollback now face lower levels of scrutiny over their stability and readiness for another downturn. This makes it easier for community lending institutions and smaller banks to operate.

Additionally, these smaller banks no longer have to comply with the Volcker Rule so those with less than $10 billion in assets can again use depositors’ funds for risky investments. Under the rollback, fewer than 10 banks, including Wells Fargo and J.P. Morgan, have to deal with the strictest regulations of the Dodd-Frank Act.