What is the purpose of the Dodd-Frank Act?

The purpose of the Dodd-Frank Act is to enhance corporate regulation and financial system transparency. Enacted in response to the financial crisis of 2007-2008, this legislation aimed to protect consumers and prevent future economic disasters by implementing stricter rules for financial institutions. It includes provisions for increased oversight and accountability in the financial system, such as the establishment of the Consumer Financial Protection Bureau (CFPB) and the Volcker Rule, which restricts certain high-risk activities of banks.

The act focuses on various aspects of financial regulation, including derivatives trading, executive compensation, and risk management practices. By mandating more robust reporting requirements and transparency measures, it seeks to restore public trust in the financial system and promote stability. The emphasis on these areas reflects a broader goal of reforming and modernizing regulations to better protect the economy and consumers from the fallout of excessive risk-taking within the financial sector.