Dodd Frank Act

The Dodd Frank act was created to address the bank's inappropriate behavior which played a key role in the financial Crisis. Please read: Real Estate Crash AND Are we a truly Capitalist Society?  before/ after this post. These details need not be explained.

The importance of the Dodd Frank Act was to say: 

You screwed up pretty badly in 2008. We don't want to have a $ trillion bailout again to prevent a whole market collapse. Thus, we need to create an Act to help fix stuff. 

*Clearly, you can't manage yourselves correctly. We need to regulate you by:

-Regulate the derivative market. Previously these trades were made in SECRET. I think AIG/Lehman brothers or some big bank (I forget the name) failed because of it's unregulated derivative market. They became caught-up in these risky trades; in fact the Chief Operating Officer said that he didn't want to make the trades because of their risk and was fired. As a result, the Federal gov't spent Billions bailing out their unregulated derivative market. 

-Remove the disorganization and mess: They consolidated the large collection of disorganized different firms/agencies within the government into one central regulating agency. 

-Regulate the market and block risky trades/investments (Volcker rule + extra): Paul Volcker was someone who we needed (in the FED) at the times of the financial collapse. He previously brought interest rates up to 20% to combat extreme hyperinflation; although very unpopular, he realized the benefits of short term pain vs long term collapse. His rule was to stop risky speculative behavior like the ponzi-scheme loans to people who couldn't pay them off. The Dodd-Frank act also added an extra boost of protection and regulation to other areas as well. 

-If you hear something, say something: Employees who report unlawful behavior or be impartial to the regulator are protected against the "company taking revenge". (Whistle Blower Act)

-Consumers are happy: The Consumer Financial Protection bureau offers average Americans protection and advice against the "Big Banks". Consumer Protection laws, "truth in lending", and overseeing financial services the average Consumers use. 

-The Advise Meeting: A Council of Regulators meet and create plans when a financial melt down occurs.

-Pay it back or else no deal: This act was created to address the giant market collapse of 2008 when millions of people owning hundred thousand $ loans couldn't pay them back; the banks lost all their money in this investment and failed. This act requires the person loaning the money to prove that they can pay their loan back. 

There are some opponents who claim that the derivative unit is too regulated or this or that, but overall the act addressed most of the concerns and did a decent job addressing them.