Obama Wants Financial Regulators to Accelerate Reform

President Obama met with financial regulators on Monday to stress the urgency for implementing all of the provisions of the Dodd-Frank Act of 2010. The Act was signed by the President in the same year yet regulators are behind in finalizing the rules that will carry out the provisions.

The Act directs sweeping reforms on both securities investment and financial institutions in response to the Great Recession of 2008. Its intent is to prevent a recession of this magnitude from happening again.

However, years later, not all of the provisions have been implemented and regulators are behind schedule.

All of the portions of the Act were to have been implemented by July 1, 2012 but only 38.9% of the rules are in place to date.

The Act gives broad oversight authority to the Federal Reserve over the financial activities of banks and investment brokerages. It specifies proactive measures to recognize risky lending and investing practices and intervene before they become a problem. It also declares protection for whistleblowers.

Reasons for delays include legal issues, lobbying, budget restrictions, and disagreements. Republican lawmakers raised objections to the Act stating that it is overly complicated and too difficult to implement let alone follow.

Disagreements stem from assertions that these rules will only further slow economic growth because of tighter money policy and extensive oversight.

One provision of the Act includes a protection and oversight group to watch over consumers of financial products such as credit cards, mortgages, and high-interest payday loans.

Banks will also be required to hold back more in mortgage securities instead of selling them off. The idea is for these financial institutions to have assets and capital to fall back on should economic conditions slow.

Another set of rules deal with the amount of money that a brokerage must hold to cushion against losses when it comes to swap trading.

Furthermore, the intent of these rules is to prevent another massive bailout of banks with Federal funding such as what happened when these institutions failed at the beginning of the recession.

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Posted by News on Aug 20 2013. Filed under Business, Finance. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.