Since the recession began in 2008, Americans have faced the worst financial crisis since the Great Depression. Millions have lost their jobs, businesses have failed, housing prices have dropped, and savings were wiped out. Responsibility and accountability must be restored to our financial system to give Americans confidence that there is a system that works for and protects them.
On July 21, 2010, President Obama signed The Wall Street Reform and Consumer Protection Act into law. Overall, this legislation will:
- promote financial stability in the U.S. by improving accountability and transparency in the financial system;
- protect the American taxpayer by ending bailouts; and
- protect consumers from abusive, predatory financial services practices.
Key provisions of the law include:
- Creation of an independent watchdog to ensure that consumers get clear, accurate information about mortgages, credit cards, and other financial products, and protect them from hidden fees, abusive terms, and deceptive practices.
- Establishment of an inter-agency oversight council that will identify and regulate financial firms that are so large and interconnected that their collapse would put the entire financial system at risk.
- A “say on pay” giving shareholders an advisory vote on pay practices, including executive compensation and golden parachutes.
- Stricter oversight of credit-rating agencies plus the right of investors and banks to sue firms for inaccurate ratings, reducing the likelihood that credit rating firms would give high ratings to risky investments.
- More authority by the Securities and Exchange Commission (SEC) to protect investors and regulate securities markets.
- New limits, known as the Volcker Rule, significantly reduce the amount of capital banks can invest in hedge funds and private equity funds.
- Strict oversight of the over-the-counter derivatives market, including mandatory clearing and trading and real-time reporting of derivatives trades.