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1 Introduction
On July 21, 2010, President Obama signed into law the most sweeping changes of the financial services industry in the USA since the Great Depression. The new law, titled the Dodd-Frank Wall Street Reform and Consumer Protection Act, was fairly quickly passed in response to the financial crisis that began in the Summer of 2007 and covers all aspects of the financial sector through substantially greater governmental oversight. While the full effects of the legislation remain to be seen, many already view the additional oversight provisions as negatively impacting the profitability of financial firms and curtailing the availability and affordability of credit to consumers and businesses. Further criticism of the new law lies in the fact that no attention is paid to reform of Fannie Mae and Freddie Mac, the two government-sponsored enterprises that back a large proportion of mortgages made in the USA. Without a doubt, the financial crisis was something of a "perfect storm" with blame being placed on a range of financial institutions. Furthermore, there is a concern among some that the effects of the legislation may well reduce the competitiveness of US financial firms in the global financial marketplace.
Given its importance, we provide an overview of some of the major provisions of the new law and a very brief discussion of some of the potential implications for various stakeholders in the financial system. It is important to emphasize at the outset, however, that there is still substantial uncertainty because the different financial regulatory agencies must implement regulations based on their interpretation of the new law. That is to say, the law itself does not specify in detail all the regulations that must now be implemented but instead delegates that task to the appropriate regulatory agencies. This process will not only be stretched out over a number of years in many cases but also provides ample time for the affected parties to lobby the agencies for a less stringent interpretation of the legislation.
2 Greater governmental oversight and restrictions
The Federal Government will assume an even greater role in addressing the issue of overall financial stability than it has in the past with the establishment of a new oversight body. In particular, a new governmental entity, the Financial Stability...