The Dodd-Frank Act

Oversees Systemic Risk on Wall Street: The Financial Stability Oversight Council (FSOC) looks out for systemic risk (the risks that affect the entire financial industry). Treasury Secretary chairs FSOC with members such as the Fed, SEC, CFTC, FDIC, OCC, FHFA, CFPA, etc.

Establishes the CFPA (Consumer Financial Protection Agency): Oversees credit and debt cards and consumer loans (but not auto loans from dealers). Protects homeowners by requiring they understand nature of risky mortgage loans, are not overly levered, etc.

Introduces Supervisory Stress Testing: The Fed conducts a supervisory stress test of a BHC with > $50 billion in total consolidated assets.

Regulates Risky Derivatives: Requires that risky derivatives should be regulated by the SEC and CFTC (Commodities Futures Trading Commission).

Volker Rule: Stop banks from gambling with depositors money. Bans banks from using or owning hedge funds for the banks own profit.

Oversees Credit Rating Agencies: SEC to regulate credit rating agencies. For example, SEC can require agencies to submit their methodologies for review and can deregister an agency that gives a faulty rating.

Increases Supervision of Insurance Companies: Created a new Federal Insurance Office under Treasury, which identifies Insurance companies (like AIG) that create risk to the entire system.

Reforms the Federal Reserve: The GAO (Government Accountability Office) was allowed to audit the Fed .The Fed cannot make an emergency loan to a single entity without Treasure Department approval.

Brings Hedge Fund Trades into the light: Hedge Funds must register with the SEC and provide data about their trades and portfolios so that the SEC can assess the overall market risk.


*The full name of the DFA is the Dodd-Frank Wall Street