Homework SourseResearch discussion The DoddFrank Act and explain from the v
Solution
dodd frank act
In an effort to prevent crises like these in the future, the policymakers behind the Dodd-Frank Act underwrote a series of critical reforms. The act increases the amount of capital banks must hold in reserve, giving the banks an added cushion to absorb loan losses in future downturns. It similarly requires banks to keep a larger portion of their assets invested in things that can be easily liquidated in the event of a bank run namely, cash and government securities as opposed to term loans.
The Dodd-Frank Wall Street Reform Act is a law that regulates the financial markets and protects consumers. Its eight components help prevent a repeat of the 2008 financial crisis.
It is the most comprehensive financial reform since the Glass-Steagall Act. Glass-Steagall regulated banks after the 1929 stock market crash. The Gramm-Leach-Bliley Act repealed it in 1999. That allowed banks to once again invest depositors\' funds in unregulated derivatives. This deregulation helped cause the 2008 financial crisis.
IMPACT
• Require lenders to ensure that homeowners can repay on their loans
• Require lenders to disclose the maximum a consumer could pay on a variable rate mortgage
• Remove financial incentives used by lenders to pressure borrowers into more costly loans
• Penalize lenders that violate federal standards by prohibiting them from foreclosing on non-compliant mortgages or allowing the borrowers to recover damages as high as 3 years worth of interest payments
• Prohibit pre-payment penalties
• Allow borrowers with high-cost loans to lower their interest rates
• Establish an Office of Housing Counseling to provide counseling on homeownership and rental housing
trumps addition
