Dodd-Frank Ethical Analysis

Register to read the introduction… These agencies and their “varying rules and standards led to certain entities not being regulated at all, with others subject to less oversight than their peer financial firms organized under different charters” (Morrison & Foerster, 2010, p. 6). After the financial crisis, analysts pointed to the “many regulatory failures” and gaps in oversight as the reason unethical and illegal practices were overlooked or ignored (Madrick, 2010, para. 3). As a result, the provisions set out by Dodd-Frank included several changes in government oversight, including the creation of new agencies, with the goal of enforcing consistent standards of ethical behavior within the financial industry. The Financial Stability Oversight Committee One of the core agencies created by Dodd-Frank is the Financial Stability Oversight Committee (FSOC), chaired by the Secretary of Treasury Tim Geithner. The purpose of the FSOC is to foster collaboration between agencies in order to create “collective accountability” in monitoring ethical practices in the financial industry (U.S. Department of the Treasury, 2012, para. 1). The committee includes leaders from the U.S. Department of Treasury, the OCC, the Securities and Exchange Commission (SEC), the Commodities Futures Trading Commission (CFTC), the Federal Deposit Insurance Corporation (FDIC), the Federal Housing Finance Agency (FHFA), the National Credit Union Administration (NCUA), the Bureau of Consumer Financial Protection (CFPB), the Fed, and a member from within the insurance industry, appointed by the president. Each member has voting rights on the committee (U.S. Department of the Treasury, 2012). According to Dodd-Frank, the FSOC was designed to monitor the financial industry for potential threats, identify gaps in regulation, and make regulatory proposals or recommendations (Morrison & Foerster, 2010). The committee also has authority to impose rules on large banks, such as limiting mergers or acquisitions or limiting a bank’s ability to offer certain financial products (Nicholson, 2010). Bureau of Consumer Financial Protection Another significant agency created by the legislation is the CFPB. According to the CFPB website, the mission of the bureau is to educate and protect consumers by regulating consumer financial products, including mortgages and credit cards (Bureau of Consumer Financial Protection, 2012). Prior to Dodd-Frank, regulation of consumer financial products was divided among several different agencies. Today, the CFPB is the central agency with authority to regulate the consumer financial services of banks, credit unions, and non-bank financial institutions, such as payday lenders, private mortgage and student loan lenders, debt collectors, and credit reporting agencies (Slack, 2012). Debates about the bureau and the extent of its authority continue in Congress (Douglas, 2012). A notable and controversial name associated with the inception of the CFPB is Elizabeth Warren, a newly elected Senator who was a professor at Harvard when Dodd-Frank was enacted (Deprez & McDonald, 2012). Despite her contributions to the bureau’s creation, Richard Cordray was appointed director after Warren failed to garner enough support in the Senate to secure the position (Deprez & McDonald, 2012). According to an article from Bloomberg, Warren will be one of the strongest supporters of Dodd-Frank in the Senate and continue to affect congressional debates on the role of the CFPB and Dodd-Frank as a whole (Hopkins & Dougherty, 2012). Reorganization of Existing Financial Oversight Agencies In addition to the creation of the FSOC and the CFPB, Dodd-Frank also revised the responsibilities and powers of several agencies that existed prior to the legislation. Originally created in the 1970s, the CFTC received …show more content…
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