EC The Dodd-Frank Wall Street Reform And Consumer Protection Act Turns Five

This week marks the 5th anniversary of the signing of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Commonly referred to as “Dodd-Frank,” the protocol was introduced in 2010 by President Obama and set in motion by the U.S. Commodity Futures Trading Commission (CFTC) in the aftermath of the 2008 financial crisis. The goal of Dodd-Frank was to protect consumers from risky behavior, abuse and financial loss.

The CFTC was in charge of writing the rules to regulate the swaps marketplace and lower investment risk in various parts of the U.S. financial system. Chairman Gary Gensler, CFTC chairman at the time said the following:

“The Wall Street reform bill will – for the first time – bring comprehensive regulation to the swaps marketplace. Swap dealers will be subject to robust oversight. Standardized derivatives will be required to trade on open platforms and be submitted for clearing to central counter-parties. The Commission looks forward to implementing the Dodd-Frank bill to lower risk, promote transparency and protect the American public.”

The Dodd-Frank Act was named after U.S. Senator Christopher J. Dodd and U.S. Representative Barney Frank who acted diligently as one to put the act into place.

Swap Regulation

The main purposes of Dodd-Frank was to reform the regulation of swaps.  It was thought at the time that these products, which had not been regulated in the United States up until that time, were the main cause of the 2008 financial crisis.

But the Dodd-Frank Act ended up with additional responsibilities. Chief among them was the need to end any and all risky and abusive financial practices, to make the financial system more transparent and accountable and to prevent institutions from becoming too big and ungovernable. In addition, the Act was meant to prevent the government from coming in and bailing out companies and banks at the expense of consumers.

In order for these goals to be actualized, the CFTC divided up the responsibility for its regulation and enforcement among several different agencies which are still in force today.