Dodd-Frank Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in 2010, represents the most comprehensive U.S. financial regulatory reform since the Great Depression. Key provisions include the Volcker Rule (restricting proprietary trading by banks), creation of the Consumer Financial Protection Bureau (CFPB), authority for orderly liquidation of failing financial firms, mandatory clearing of standardized derivatives, and stress testing for large banks. For example, banks with over $50 billion in assets (later raised to $250 billion) face enhanced supervision and annual stress tests. The Act created the Financial Stability Oversight Council (FSOC) to monitor systemic risk and designate systemically important financial institutions (SIFIs) for enhanced regulation. Living wills require large banks to plan for bankruptcy without taxpayer bailouts. While supporters credit Dodd-Frank with making the financial system safer, critics argue it increased compliance costs and reduced lending. Subsequent legislation in 2018 rolled back some provisions for smaller banks while maintaining strict oversight of the largest institutions.