The Dodd-Frank Act and Wall Street Reform

790 Words2 Pages

The Glass Steagall Act was passed on 1933, which is also known as The Banking Act to tighten regulation on the way banks did their business. This act was written as an emergency measure when about 5,000 banks failed during the Great Depression. Banks mostly failed because of the way they would invest with money. The act prohibits banks from investing money on investments that turn out to be risky. Banks could no longer sell securities or bonds. The act also created Federal Deposit Insurance Corporation (FDIC) to protect the deposits of individuals, which is still used to this date. The FDIC in this era insures your deposits in your bank up to $250,000. This gave the public confidence again to deposit their money in the bank. In 1933 there was a bank holiday where banks closed for four days to make sure that they were able to keep in business. About 4,000 banks were closed because they were not able to work no longer. Commercial banks and Investment bank were separated into two different sectors.

The Dodd-Frank Act puts Wall St. accountable for investing money in risky behavior that then fails. The law is designed to make sure that financial institutions do not abuse with risky investment and be responsible for any failures. For examples when banks were considered too big too fail the government went on to bail them out. The law also provides more consumer protection to everyday individuals who may not know much about the complicated financial structure. The law states that applications and terms and conditions must be easy to read and understand. Before people would get into bad loans or be charged ridiculous fees because the way “the fine print” was written. Even the smartest people made costly financial mistakes where t...

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...ly and there will always be some loopholes. I do not see anything that could be changed or added to this law. Time will tell if there will be any amendments or adjustments regarding this new law. At least for now as consumers we can be rest assured that there is now some type of protections and that our money should be safer in the banks. Finally we can have some peace of mind that the when buying a home the terms will be easier to understand.

Works Cited

Morgenson, Gretchen. "Wake Up the Banking Police." The New York Times. The New York Times, 14 Dec. 2013. Web. 04 May 2014. .

The White House. "Wall Street Reform: The Dodd-Frank Act." The White House. The White House, n.d. Web. 04 May 2014. .

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