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Dodd-Frank Act

Does the government control Wall Street?


  • PL 111-203 AKA Dodd-Frank Wall Street Reform and Consumer Protection Act

  • Federal Bill

  • Passed July 21, 2010


Kain works at the massive Bank of Abel and frequently invests the bank’s money into risky assets. Since the economy relies on this bank, everyone will suffer if the investment fails. Ironically, Kain isn’t scared at all-- his bank is too big to fail, so the government will likely bail him out anyways. Prior to the Dodd-Frank Act, Kain’s irresponsible investments would never have been punished. However, as a result of the act, his buddy Adam was prompted to report him to the government, who investigates and punishes Kain.


The Dodd-Frank act was created in response to the irresponsible and corrupt investment practices that led to the 2008 financial crisis. When huge banks’ risky investments plummeted, millions of Americans lost their jobs, homes, pensions, and savings. Consequently, many Americans blamed the crisis on the banks and other financial institutions, demanding that they exercise better transparency and implement stricter regulations. Proponents of the bill would argue that the presented restrictions provide much-needed protections against dangerous financial practices.


The majority of the Democratic Party, along with Former President Obama, supports this act. They believe that financial institutions such as banks and credit rating agencies abuse the American people for profit. To them, better regulation of these institutions would prevent future financial crises and protect consumers.

The majority of the Republican Party opposes this act. They believe the act would hinder the competitiveness of American financial institutions. Additionally, they believe that small banks would be unfairly restricted, despite having little involvement in the 2008 financial crisis. According to them, the act’s limitations on high risk investments would force small banks to give up potentially profitable investments.


The bill passed through the House 237-192 and through the Senate 60-39 almost entirely along party lines, before being signed by President Barack Obama. The “winners'' (majority) included the Democratic party who supported the bill, and, more specifically, the Congressmen who proposed the bill, Connecticut Senator Chris Dodd and House member Barney Frank. Many consumers would be reassured by the measures aimed at preventing a similar crisis in the future. The “losers” (minority and dissenters) included the Republican party who opposed the bill as well as the banks and financial institutions who were now placed under heavier regulation.


The act is widely considered the most significant financial reform since the Glass-Steagall Act (a response to the Great Depression). Multiple government agencies were established by this act, including the Financial Stability Oversight Council (which identified risks in financial institutions such as banks) as well as the Office of Credit Ratings (which ensured credit ratings would remain trustworthy). Additionally, the Consumer Financial Protection Bureau (CFPB) educates consumers on predatory tactics, while investigating and fining fraudulent actors. These agencies help protect consumers and investors from banks and individuals acting in bad faith. Furthermore, the act helped the SEC regulate high-risk investments, prohibited banks from high-risk investments, required that banks keep larger reserves, and rewarded whistle-blowers. As a result of these changes, banks became more restricted in their investment opportunities. However, the act helps ensure that similar crises never happen again.

Tags #bill #laws #doddfrank #wallstreet

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