Financial Regulatory Reform

On July 21, 2010, President Barack Obama signed into law the sweeping new financial regulatory reforms known as the "Dodd-Frank Wall Street Reform and Consumer Protection Act"– the product of nearly two years of work and collaboration on the part of members of the House and Senate, the White House and Treasury Department, and industry and consumer groups.  Since its inception in 2000, the Forum has supported and worked to achieve sensible financial regulatory reform that protects consumers, investors, depositors, and shareholders, while also ensuring that our financial markets are competitive, innovative, and able to provide the capital necessary to fuel economic growth and job creation.  The Forum and its members worked to play a thoughtful and productive role in contributing to the public dialogue on this critical legislation and supported sensible reform. 

Included in the legislation (summary here – full text here) is the creation of a Financial Stability Oversight Council, comprised of relevant financial regulators and chaired by the Treasury Secretary, which will survey the financial system for emerging risks and potentially troublesome systemic trends.  The legislation also seeks to end “too big to fail” by instituting a resolution mechanism which gives federal authorities the ability to seize and wind down a distressed, failing financial firm in an orderly way.  The legislation also established the Consumer Financial Protection Bureau, a new independent regulator of consumer financial products that will be led by a Presidentially-appointed and Senate-confirmed Director.  Most derivatives contracts will now be brought onto centralized exchanges and insured with greater capital standards, so that these markets have greater transparency and government regulation.  Other notable aspects of the legislation include the creation of the Federal Insurance Office, the creation of the “Volcker Rule,” which prohibits bank holding companies from engaging in proprietary trading, and places restrictions on those firms’ ownership of hedge funds and private equity, and strict new rules regarding the Federal Reserve’s ability to provide assistance to financial firms.

While the bill is not perfect, and while other important reforms certainly remain – such as reform of the housing GSE’s and agreement on globally-coordinated capital standards – this new law is an important first step towards ensuring American financial stability and continued economic recovery. 

The Forum will continue to work constructively with the regulators charged with implementation of the legislation to create a financial supervisory framework that ensures institutional safety and soundness and systemic stability, while also meeting the financial needs of American businesses, workers, consumers, and investors.