Heavy Toll of the Economic Crisis and the Resulting Dodd-Frank Act

After the housing bubble broke, the United States started to go through severe economic crisis before Obama took office in 2007. However, it wasn’t entirely his fault for why the country continued into downward spiral until 2009; a series of unfortunate events caused it to happen.

It actually cost the United States government a ton of money – about $22 trillion. It was the worst economic crisis since the Great Depression. Besides taking out a large chunk of the United States’ coffers, the recession also wiped out about a year’s worth of good domestic product.

Homeowners, as a collective, also lost almost 2 billion dollars and the number of mortgage foreclosures skyrocketed from its previous stable level.

To handle the crisis and help regulate banks, Obama signed the Dodd-Frank Act into law.

However, there are still many critics of it. Banks resent the increased legislation because it limits the amount of practices they can utilize. During a recent Banking Committee hearing, a Republic senator stated that he felt the law was too invasive and should be stripped down a bit.

However, some people feel that Dodd-Frank isn’t as bad as other made it out to be. There is an idea that many of the major banking institutions on Wall Street engaged in careless lending and investing practices, which some believe helped bring about the economic collapse. More Democrats than Republicans tend to hold this view due to Democrats’ broader acceptance of government regulation; Republicans tend to prefer less government regulation.

You’re probably wondering what the Dodd-Frank law really is and how it is supposed to help the United States deal with the overall financial crisis.

The Dodd-Frank Act is designed to give the government more power in regulating the financial industry. The act allows them to do this by generating new financial regulatory processes that encourage large banking institutions, such as Bank of America, to be more open in how they operate and to consider consumer protection more.

To help achieve its goal, the act also created the Consumer Financial Protection Board and encourages financial insiders to grant information to the government by granting them a financial reward if they do so.