The Wall Street Reform and Consumer Protection Act​ (WCPA), commonly known as Dodd­Frank, became law on July 21, 2010. Signed into law by President Barack Obama, Dodd­Frank was renamed to honor its co­creators, U. S. Congressman (D­MA), Barney Frank and U. S. Senator (D­CT) and former Chair of the U. S. Banking Committee, Christopher Dodd. The dual goals of this transformative and voluminous series of rules and regulations, as stated in its original name, are to overhaul the financial services and banking industry (symbolized by “Wall Street”, the storied New York City financial district) and enhance federal consumer protections. Both goals attempt to address the lessons gleaned from the unprecedented financial industry meltdown in 2009, which impacted key business sectors such as banking, real estate, and manufacturing, especially automotive manufacturing.


There are over 300 Dodd­Frank rules that are documented in more than 5000 pages. Although six years have passed, rules continue to be drafted including rules that address the revamping of the housing finance sector. Interestingly, the authors of these new rules are several federal regulators, including the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), the Securities and Exchange Commission (SEC), the Federal Housing Authority, and the Commodity and Futures Trading Commission (CFTC), among others. Collectively, these rules focus on (1) preventing another financial crisis, (2) avoiding further taxpayer bailouts, (3) ensuring banks have enough capital liquidity to remain solvent during extreme market volatility, (4) enabling bank bankruptcies to proceed without adverse impact, (5) influencing executive compensation levels, and (6) curtailing derivative risks and excesses. 


Dodd­Frank also established a new federal regulator with broad, independent authority, the Consumer Financial Protection Bureau (CFPB). This powerful new agency regulates banks and non­bank financial institutions, authorizes the breakup of large, complex financial companies, bolsters and centralizes the consumer protection regulatory powers of other bank regulators, and wields broad enforcement authorities with very large banks and credit unions, non­bank financial institutions, and mortgage related businesses. 


Dodd­Frank is bellwether legislation. It comprises broad and sweeping legislative reforms. Its impact will continue to reverberate throughout the financial services industry as financial service providers adapt and adjust.


By: Dr. Sheryl Smikle