President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection financial reform bill on July 21, 2010. President Obama stated that there will be no more tax-funded bailouts for the financial industry.
The law permits the FDIC to borrow taxpayer money from the Treasury temporarily to help cover the costs of closing large banks that would have to pay the Treasury back over time. The law will allow the government to eliminate and split up companies that may weaken or threaten the economy.
The law will require regulators to look for risks in the financial system and will create an independent consumer protection agency, the Bureau of Consumer Financial Protection within the Federal Reserve to write and enforce new regulations regarding credit and lending.
Companies will have to meet tougher standards. However, there will still be different standards for different types of companies: for credit unions, thrifts, state-chartered banks, etc. The law will require the Treasury department to monitor insurance companies which are currently regulated by the insurance commission of each state.
The law will make the Office of the Comptroller of the Currency the only regulator for U.S. based banks with branches in more than one state. Previously, the Office of Thrift Supervision oversaw these banks.
The law will require banks to have more capital (money that is readily available) and regulators will decide how much capital banks must have to cover unexpected losses.
The law will require that brokers offering personalized investment advice must act in clients' best interests. The law will hold brokers to the same standard that financial advisers already must meet.
The law will allow regulators to monitor credit card companies and banks. The law will require credit bureau agencies to be more accountable. The law will allow regulators to limit the fees retailers pay when consumers make purchases with debit cards. The law will allow the Bureau of Consumer Financial Protection to write rules and eliminate products it feels are unsafe, such as interest-only mortgages. Investors will be able to sue agencies for ignoring risks.
The law will let shareholders of public companies to provide input on the pay packages for top executives. They will be able to vote to approve or disapprove of pay packages. The law will ban bonuses for brokers which were based on the cost of a mortgage. Brokers gave borrowers higher rates and mortgages even when lower rates were available based on credit history.
The law will require that lenders verify that a borrower can afford their mortgage and may be fined if they fail to review a borrowers' income and credit history.
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