The Risk Controllers: Central Counterparty Clearing in Globalised Financial Markets

21

The Way Forward

21.1 THE DODD-FRANK ACT

On 21 July 2010, President Obama signed into law the biggest and most sweeping overhaul of US financial regulation since the Great Depression.

As its title suggested, the ‘Dodd-Frank Wall Street Reform and Consumer Protection Act’ was a wide ranging piece of legislation.¹ Named after Senator Christopher Dodd and Congressman Barney Frank, the two legislators who piloted the law through Congress, the 2319 page act aimed to kill off the doctrine of ‘too big to fail’.

Congressional approval followed frantic negotiations, lobbying and compromise right up to the final vote, as legislators sought to reconcile the House and Senate versions of the bill and win over Republicans from northeastern states to enable the Democrat-sponsored legislation to circumvent a filibuster. It passed the Senate by 60 to 39 votes.

Despite determined lobbying by the financial sector and last-minute haggling, the act was tougher than had seemed probable a year before when the Treasury published its draft. This reflected a groundswell of resentment against Wall Street, its profits and bonuses, at a time of high unemployment on ‘Main Street’ throughout the rest of the USA.

Reversing three decades of financial deregulation, Dodd-Frank's goal was to make sure that big banks in the US could never again bring the world to the brink of economic and financial collapse, that US consumers had greater financial protection and that gaps in the regulation of capital markets, exposed ...