Dodd-Frank Questions

1. What are the Dodd-Frank main proposals? Summarize, if possible.

Dodd-Frank main proposals include various reforms and consumer protection acts. The main purpose is to avert cases where the public is losing from mismanagement and lack of accountability of major institutions. This is especially applicable with the fall of Wall Street and some of the major banks. His major proposals include the following: first, enactment of legislation that involves consumer protection, policies to regulate and protect tax payers avoiding bailouts, developments of an advance warning system, instruments that will ensure that there is accountability and transparency eliminating loopholes for corruption, corporate governance and establishments of executive compensation that will see that stakeholders’ affairs are put into considerations. Another measure involves development of consumer protection body that will act as a watch dog. Consumer Financial Protection Bureau is a major body that is entitled with such mandatory task. The bureau also ensures that an independent budget is put in place. Addressing system risk is another critical task that will ensure that failures do not occur. This should include a body of experts who will govern the management of public affairs. Leading bodies such as banks should also be protected. For example Federal Reserve Emergency lending should prohibit bailing. Banks have to be improved and should ensure that thrift regulations are observed. Creation of rating agencies is also vital.

 2. What is the basic motivation behind each of these proposals?

            The basic motivation behind the proposed ideas by Dodd-Frank mainly concerns the failures of major financial institutions. This has raised the need to improve efficiency and accountability in management of major public organization. Therefore, the motivation aims at facilitating the process in which the public is losing through mismanagement and lack of accountability.

3. For each of the proposals, discuss who is likely to support the changes and why (winners).

The proposed changes will definitely receive support from the public who are the tax payers. This is because; they are the main losers when such institutions become subjects to serious financial crises. For example, when Wall Street and big banks failed, about eight million people lost their jobs, business bankrupted, prices of houses dropped as well as the value of personal savings. Notably, the public is usually on the receiving end. However, for these proposals to be accomplished, various stakeholders have to contribute positively. For example, the legislature has to enact the relevant policies. The Federal leading institutions have to play their role effectively. Consumer protection should also be enforced by the relevant authorities. In this context, the winners will be tax payers who will benefit from the proposals. The major advantage to the tax payers is that they will bear no cost on liquidation but all the cost will go to the financial firms

4. For each of the proposals, discuss who is likely to fight against the changes and why (losers).

Although most of the proposals will benefit most of Americans, the proposals are likely to receive major criticisms from some people. For example, some agencies and individuals were benefiting from the mismanagement of these institutions. Some people will feel that they are being threatened by the new requirements. Some of the individuals such as politicians may find it hard to comply with the new policies. Some may go an extra mile to see that such legislation does not go through in parliament. There are individuals who were taking the advantage of presence of loopholes in major lending institutions and big banks. The office of Thrift Supervision has to be abolished and its rights transferred to the Office of the Comptroller of the Currency. This may lead to development of opposing ideas among the major stakeholders. Moreover, Statutory and Regulatory Requirements will be eliminated paving way for NRSRO Rating. This aims at reducing over-reliance on a single body and instead encourages investors to analyze their own ratings.

5. Analyze possible negative consequences of the Act on financial services providers, particularly banks

The Act on financial services providers that particularly affects banks may have negative consequences. Financial providers are entitled with the duty of provision of money in the economy. This act, however, deprives financial service providers such as banks of some rights. The new act requires a thrift and stringent regulation on their operations. This is an effort to create accountability and transparency. When this is done, the public will be aware of all their proceedings, something that may be a threat to their security and sustenance. They will also be exposed to their rivals.