Question

As part of the Dodd-Frank Act, U.S. regulators are forcing more contracts to be cleared through central counterparties. Who gains and loses with these changes?

Answer 1

Dodd-Frank Act, is also known as financial reforms bill, this new bill helps in putting new controls on the banking industry and protect consumers. So as we have seen in the past that there are always some winners and losers of any new financial reforms Act, hence in case of Dodd-Frank Act, there are following gains and losses of these changes;

Gains;

1. It will help in improving stability with positive impacts on efficiency & economic growth.

2. It will strengthen Wall Street because new changes will not threaten the finance industry's basic business model.

3. Derivatives traders will also be in good position because riskier derivatives trading will be separated from banks hence economic crisis will not affect whole economic activities of the country at one time.

4. Consumer Financial Protection Bureau (CFPB) will help in more protection for the consumers because area of CFPB have been widen to cover more consumer’s products.

5. Swipe free reforms also will result into some benefits because from now convenience stores will not be in position to charge higher fees for using credit & debit cards.

loses;

1. Bank of America will suffer from huge costs of these economic changes. As we have noticed that swipe free transactions will result into low earnings for the banks, apart from this transactions also will decline.

2. Ratings agencies will also suffer because due to these economic changes customers will be in position to sue ratings agencies for wrong & faulty information. Thus this is a negative impact on ratings agencies.

3. Negative impact on rulling political paties, as we know that end users will realize about the true benefits from these economic changes hence rulling party may loose its’ popularity amongst voters of the country.