Understanding Credit Scores: Insights From Boston Attorneys – The Dodd-Frank Wall Street Reform and Consumer Protection Act is legislation passed by the US Congress in response to the behavior of the financial industry that led to the 2007-2008 financial crisis. It seeks to make the US financial system safer for consumers and taxpayers.

Named for sponsors Senator Christopher J. Dodd (D-Conn.) and Rep. Barney Frank (D-Mass.), the act contains many provisions, spelled out in 848 pages, that will be implemented over several years. .

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The Dodd-Frank Wall Street Reform and Consumer Protection Act is a massive piece of financial reform legislation that was passed in 2010, during the Obama administration.

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Commonly known as the Dodd-Frank Act, or Dodd-Frank, it established several new government agencies tasked with overseeing various legal components and, by extension, various aspects of the financial system.

The financial crisis of 2007-2008 was probably the worst economic disaster to hit the country (and the world) since the Wall Street crash of 1929. In general, it was caused by greed-driven behavior and weak supervision of financial institutions.

The loosening of financial industry regulations in the decade leading up to 2007 allowed various institutions in the US financial services industry to lend money in a way that was riskier than ever. The real estate sector in particular is experiencing huge growth that cannot be supported.

The bubble burst, sending the banking industry and global stock markets into a tailspin. It created the worst global recession in generations.

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The Dodd-Frank Wall Street Reform and Consumer Protection Act is aimed at preventing another financial crisis like the one in 2007-2008.

When Donald Trump was elected president in 2016, he promised to repeal Dodd-Frank. Agreeing with the critics, the US Congress passed the Economic Growth, Regulatory Relief, and Consumer Protection Act, which rolled back an important part of the Dodd-Frank Act.

Here are some of the provisions of that law, and some areas where previous standards have been relaxed:

After Joseph Biden is elected president in 2020, the CFPB is focused on repealing rules from the Trump era that are in direct conflict with the CFPB charter.

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The Biden administration also announced its intention to reestablish rules against other forms of predatory lending, such as payday loans, and on June 30, 2023, Bided signed legislation to reverse the OCC’s payday loan regulations. In addition, subprime auto lending practices are regulated by the CFPB.

Supporters of Dodd-Frank believe that the law will prevent the economy from experiencing a crisis like the one in 2007-2008 and protect consumers from many of the abuses that contributed to the crisis.

Detractors, however, have argued that the law could harm the competitiveness of US firms relative to their foreign counterparts. In some cases, they contend that regulatory compliance requirements unduly burden community banks and small financial institutions, despite the fact that they played no role in causing the financial crisis.

Famous financial world such as former Secretary of the Treasury Larry Summers, CEO of Blackstone Group L.P. (BX) Stephen Schwarzman, activist Carl Icahn, and CEO of JPMorgan Chase & Co. (JPM) Jamie Dimon also stated that, while each institution is definitely safer because of the capital constraints imposed by Dodd-Frank, the constraints make the market more illiquid overall.

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The lack of liquidity can be particularly strong in the bond market, where all securities are not marked to market and many bonds lack a constant supply of buyers and sellers. Higher reserve requirements under Dodd-Frank mean banks must keep a larger percentage of their assets in cash. This reduces the amount they can hold in marketable securities.

As a result, this limits the bond market-making role traditionally performed by banks. With banks unable to play the part of a market maker, prospective buyers may have a harder time finding counteracting sellers. More importantly, prospective sellers may find it more difficult to find counteracting buyers.

Dodd-Frank was intended to stop the highly risky financial industry activities that led to the 2007-2008 financial crisis. The goal was, and still is, to protect consumers and taxpayers from harmful practices such as predatory lending.

Yes it is; however, its regulatory power was diluted with the passage of the Economic Growth, Regulatory Relief, and Consumer Protection Act in 2018. Still, certain aspects, such as the bank stress test it is called for, are used today. The Federal Reserve publishes the results of stress tests regularly.

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Detractors of the Dodd-Frank Act have argued that the law can harm the competitiveness of US firms relative to their foreign counterparts. In particular, critics say that its regulatory compliance requirements are too burdensome for community banks and smaller financial institutions—despite the fact that they played no role in causing the financial crisis. Some figures in the financial world have also argued that, while every institution is undoubtedly safe because of the capital constraints imposed by Dodd-Frank, the constraints also make the market more illiquid overall.

In 2018, the passage of the Economic Growth, Regulatory Relief, and Consumer Protection Act rolled back many of the regulations put in place by the Dodd-Frank Act. Under the Dodd-Frank rules, banks with $50 billion in assets were subject to heavier capital and liquidity requirements, but a new law in 2018 raised the asset threshold to $250 billion. These changes ease regulations for small and medium-sized banks. When Silicon Valley Bank collapsed in March 2023, observers said that the lack of regulatory scrutiny in financial institutions of this size played a key role in the bank’s failure.

The Dodd-Frank Act, enacted in 2010, was a direct response to the 2007-2008 financial crisis and subsequent government bailouts under the Troubled Asset Relief Program (TARP).

This law establishes various reforms in the entire financial system, with the aim of preventing a repeat of the 2007-2008 crisis and the need for further government bailouts. The Dodd-Frank Act also includes additional protection for consumers.

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Although the Trump administration reversed and weakened some aspects of the Dodd-Frank Act, especially those affecting consumers, the Biden administration intends to rebuild and strengthen previous reversals to protect individuals who may be subject to predatory lending practices in industries such as for-profit education. and the car.

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The offers that appear in this table are from partnerships from which they receive compensation. These compensations can affect how and where listings appear. not including all offers available in the marketplace. Any lawyer working in the financial market space needs to keep their finger on the pulse and distil subtle differences between matters. Here four lawyers from Jones Day explain how you can start your career in this global and multifaceted area.

* Dickson Chin, Brittany DePeder, Hannah Fregolle and Anthony Masero are attorneys at Jones Day and contributed to this article. The views and opinions expressed here are the opinions or personal opinions of the author; they do not necessarily reflect the view or opinion of the law firm with which they are associated.

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Dickson Chin, partner, New York: We are a full-service global Financial Markets Practice. Clients benefit from a collaborative approach and a deep understanding of the banking and financial markets. More than 300 legal experts advise on a full range of complex cross-border financial transactions, regulatory matters, investigations, and litigation.

We represent a diverse client base of global financial institutions, issuers, borrowers, funds, asset managers, and fintech companies. We have helped them close more than $1 trillion in financing transactions over the past five years, including many precedent-setting financings. Our deep regulatory bench has advised on compliance, investigations, and enforcement matters around the world. We advise clients in advanced financial product litigations, including structured finance, derivatives, and class action litigation.

Brittany DePeder, associate, Columbus: Unlike many firms that tend to lean towards either representing the lender’s side or representing the borrower’s side, Jones Day does a beautiful split even the work of the lender’s side and the work of the borrower’s side. This variety keeps things interesting for our lawyers, but it also helps inform lawyers about current trends in the market. Another hallmark of Jones Day’s financial markets practice is our global presence and “One Firm Worldwide” approach. I can’t think of a single deal I’ve worked on that didn’t involve attorneys from multiple Jones Day offices, and the failures that our attorneys collaborate on are always something that amazes me and makes me proud to be a part of Jones Day.

Hannah Fregolle, partner, Chicago: comprehensive. Our financial markets practice is designed to respond to the interconnected nature of our clients’ needs. We have transactional lawyers, litigators and regulatory lawyers ready to solve any problem that our clients face in an organized and thorough manner. The depth and breadth of our practice has been evident over the past few years as we have worked with clients to navigate complex and multifaceted issues at times that cannot be denied.

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