What Is Dodd Frank?

The Consumer Financial Protection Bureau, or CFPB, was created as a tool of financial reform in the legislative package that was authorized by the Dodd-Frank Act, but the law specifically includes terms that prohibit setting interest rate limits, which is contrary to the 36-percent limit that the CFPB is currently trying to mandate as a universal limit on short-term rates. The specifics of the Dodd-Frank Act, according to the www.dodd-frank-act.us, state that the legislation grants, "NO AUTHORITY TO IMPOSE USURY LIMIT" unless such a limit is first passed through due legal processes.

On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which is commonly referred as the Dodd-Frank Act. This act was passed as a response to the Great Recession in order to prevent potential financial debacle in the future. This regulation has a significant impact on American financial services industry by placing major changes on the financial regulation and agencies since the Great Depression. This paper examines the history and impact of Dodd-Frank Act on American financial services industry.

However, two known authors in this field of study believe that companies with low business risk obtains factors of production at a lower cost which may also pave to the ability of the firm to operate more efficiently (Amit & Wernerfet, 1990). Therefore, many stockholders faced a high of uncertainty; this is because some companies do not have the financial strengths to cover its debts that even may result to bankruptcy.

Firstly, the background of passing Dodd-Frank Act is the financial crisis. The direct reason of this crisis is that many banks, for the purpose of the making profits, were engaged in the high-risk subprime mortgage. Finally, the default of repayment leads to the

Frank Act which brought in multitude of financial stipulations and rules that were aimed at

Dodd-Frank is the latest financial reform passed by Congress, and by far the most extensive. According to Amadeo, Dodd-Frank is “the most comprehensive reform since the Glass-Steagall Act of 1933” (2012, para.1). The goals of Dodd-Frank are to implement consumer protections, end bailouts with tax payer money, create a council to identify risks, eliminate loopholes for risky behavior, implement say on pay for executives, protect investors, and enforce strict regulations on Wall Street (House of Representatives, n.d.). Dodd-Frank lacks clarity and is lengthy, running over 1,000 pages long (New York, 2012). In many cases, Dodd-Frank does not contain explicit rules, but instead creates an outline whereby financial oversight agencies have been charged with conducting research and writing and implementing the rules.

Quickly these corporations became known as the Fallen Angels and they were looking to rebound in any way possible. Operating managers at the time believed the corporations would rebound fairly easily because corporations would have no choice but to put all their attention on controlling their debt. However, in a situation such as this, close precision and execution is required otherwise the smallest mistake can lead to failure. According to Warren Buffet, “a plan that requires dodging them all is a plan for disaster.” The accumulation of debt continued to rise and not even the healthiest of corporations could obtain the capital to finance it. Even though businesses continued to suffer from accumulating debt, Investment Bankers noted that researchers found over time “higher interest rates received from low grade bonds had more than compensated for their higher rate of default.” From this information, Investment Bankers saw this accumulation of debt as an opportunity for investors. They concluded it was beneficial to have a diversified portfolio of junk bonds because the returns would be higher than a portfolio of high grade bonds. However Warren Buffet disagrees and discovered a hole in this fundamental approach by the Investment Bankers.

I believe the Frank-Dodd Act accomplishes what it is intended for because of the many changes banks now do their business. Banks should be kept as banking and not risking money that people trust them to save. Money is hard to earn and people want to put away some in order to have a good retirement. Before if you went overdraft at the bank they used to charge you an “overdraft fee” regardless you wanted them to approve it or not. Now you have the option of what many banks call “overdraft protection” where they still charge you the overdraft fee and cover your purchases. Now you have the choice to permit the bank. Before credit card application were

The Dodd-Frank Wall Street Reform and Consumer Protection Act brought the most significant changes to financial regulation in the United States since the reform that followed the Great Depression. It made changes in the American financial regulatory environment that affect all federal financial regulatory agencies and almost every part of the nation’s financial services industry. Like Glass-Steagall, the legislation passed after the Great Depression, it sought to regulate the financial markets and make another economic crisis less likely. Banks were deregulated in 1999 by the Gramm-Leach-Biley Act, which repealed the Glass-Steagall Act and essentially allowed for the excessive risk taken on by banks that caused the most recent financial

“Too Big to fail” was first known in a 1984 Congressional hearing where Congressman Stewart McKinney discussed the Federal Deposit Insurance Corporation’s intervention with Continental IIIinois. The idea interprates that certain financial institutions are so large, if any of them fails, it will bring an unexpected disastrous effect to the economy. As we all known, the 2008 financial crisis had arose the “too big to fail” problem to the peak controversial point. Banks, insurance companies, auto companies are part of the big company industry. They make profit by creating and selling complicated derivatives and trading loans, commodities and stocks. When the big economic environment is prosperous, those big companies make a competitive

Bank failures had resulted and caused the savings of people, that were not even in the line of investment, to have their bank values erased and unable to trace back or retain anything. Income, business, bank, and industrial business failures and

The Dodd-Frank Act put a considerable burden on financial regulators whom have to work out the details in order to implement its vision. It includes a variety of points relating to the prevention of a future crisis (Kim & Muldoon 2015). Some of these major points include: (1) The creation of a new Financial Stability Oversight Council, comprising existing regulators, to be responsible for overseeing any financial institution or set of market circumstances determined to be likely to result in risk to the overall economy, (2) A reallocation of banking oversight responsibility among the Federal Reserve System, the Comptroller of the Currency, and the FDIC, requiring the Federal Reserve Board to supervise nonbank financial companies “that may

We all know from our course that leverage and liquidity risks of financial institutions are vulnerable to the crisis. The financial crisis that emerged in 2007 had many and varied causes, but one of its most

The recent financial crisis has a huge impact on systemic Important Financial Institutions; it’s distressing effect can be felt in almost every business area and process of a bank. A fairly large literature investigates the impact of financial crisis on large, complex and interconnected banks. The great recession did affect banks in different ways, depending on the funding capability of each bank. Kapan and Minoiu (2013) find that banks that were ex ante more dependent on market funding and had lower structural liquidity reduced supply of credit more than other banks during crisis. The ability of banks to generate interest income during the financial crisis was hampered because there was a vast reduction in bank lending to individuals and

This work aims at studying the effect of financial distress on operating cash flows of corporations. The interest in the area of financial distress has increased due to considerable number of corporate failures around the globe in recent years especially since the early 1990s. Notable failures include Global Crossing, Enron, Adelphia, Worldcom, HH Insurance, One Tel, and Ansert Airlines in 2001, and most recently FIN Corp in 2007.