Question

Should there be changes to the Dodd-Frank Act? Why or why not?

Answer 1

The Dodd Frank Act was enacted in 2010 and was a response to the massive financial crisis of 2008. It aimed to create a more robust financial system by reducing systemic risk and ensuring that risk is managed by elimination of complicated financial products and its replacement by simpler taxonomy and products. Also a system of stress testing the banks and placing greater responsibility on Wall Street was envisaged as part of the act which also resulted in the formation of Financial Stability Oversight Council to eliminate persistent issues plaguing the financial services industry.

All these measures were safeguards introduced into the system to prevent another recession and introduce more regulatory checks and balances to ensure that consumer interests are protected and rampant profiteering is prevented. Any dilution of the Dodd Frank Act would result in reduction of these safeguards and this might lead to increase in systemic risks which may lead to a recurrence of events as seen during 2008 and may lead to another recession or depression which would have disastrous effects on the economy and livelihood of individual citizens.