About the Consumer Welfare Act

The recently-passed act has been very politically devisive.

Congress passed, and President Obama signed, into law the Wall Street Reform and Consumer Protection Act in July of 2010. This Act is a major component of the current administration's financial regulation reform platform, and aims to enhance the accountability and transparency of financiers. The Act also aims to protect individuals from financial practices deemed to be abusive.

Creation

This Act was a direct legislative response to the economic recession from 2007 to 2009. It was proposed by the House of Representatives Financial Services chairman Barney Frank, and by the Senate Banking Committee chairman Chris Dodd, two prominent Democratic congressmen. The legislation was a hotly debated topic and the voting fell sharply across political lines. In the end, the Democratic-controlled Congress' desire for increased protections won out over the Republican pursuit of a true free-market financial structure.

Financial Stability

The first title to the Act is "Financial Stability." It creates two new agencies in an attempt to consolidate regulatory oversight, specifically the Office of Financial Research and the Financial Stability Oversight Council. The goals of these two agencies are promoting financial integrity, providing detailed market analysis and monitoring market risk levels. These organizations were created to help provide information across federal departments.

Transfer of Powers

Another important title, Title III, was named the "Enhancing Financial Institution Safety and Soundness Act of 2010." This portion of the legislation abolished the former Office of Thrift Supervision and transferred its oversight powers to the Federal Reserve, the FDIC, and the Office of the Comptroller of the Currency. This act also increased the FDIC insurance on individual savings accounts from $100,000 to $250,000, in hopes to provide increased consumer protection.

Wall Street Transparency

Title VII to the Act was named the "Wall Street Transparency and Accountability Act of 2010." Many advisers and analysts declared derivatives and credit default swaps to be major components of the recession of the past three years. In response, this act repealed a prior exemption from regulation enjoyed by security based swaps. These volatile securities are now encouraged to be traded through exchanges, just like most publicly-traded securities.

Investor Protections

Title IX, named the "Investor Protection and Securities Reform Act of 2010," aims to provide increased information and interaction for shareholders. The title requires shareholder approval of executive compensation at least every three years, and increases regulations on director compensation and shareholder interaction in those decisions. This title also expands the definition of, and increases regulations on, the securitization of asset-backed obligations.

All in All

The impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act won't be known for years to come. Many of the provisions of the act merely create new administrative agencies who are now tasked with the responsibility of developing specific regulations. As a result, while many of the provisions account for increases in oversight and governmental consolidation, most analysts asked to grade the legislation gave it an "incomplete." While the majority of the Act was deemed to be heavily liberal, congressional democrats did include Title XIII which reduced prior Troubled Asset Relief Program funds from $700 billion down to $475 billion. Regardless, the Act is still seen as extremely politically divisive.

References

• Govtrack.US: H.R. 4173 Wall Street Reform and Consumer Protection Act
• "The Wall Street Journal": Law Remakes U.S. Financial Landscape