Which law, enacted in 2010, reformed financial regulation after the Great Recession to promote financial stability and end bailouts?

Which law, enacted in 2010, reformed financial regulation after the Great Recession to promote financial stability and end bailouts?

• A. Glass-Steagall Act
• B. Gramm-Leach-Bliley Act
• C. Sarbanes-Oxley Act
• D. Dodd-Frank Wall Street Reform and Consumer Protection Act (2010)

Answer: (D)

Financial regulation after the Great Recession aimed to reduce systemic risk and end taxpayer-funded bailouts. The law enacted in 2010 does exactly that by expanding regulators’ powers, creating new oversight bodies, and instituting rules for both large banks and nonbank financial firms. It formed the Consumer Financial Protection Bureau to guard consumers, established the Financial Stability Oversight Council to identify and monitor systemic risks, and required stress tests and living wills for big institutions to test their resilience and ensure orderly wind-downs. The Volcker Rule limits certain high-risk trading activities by banks, further reducing the chance that a single firm’s troubles could threaten the whole system. Collectively, these provisions are designed to make the financial system more transparent, accountable, and stable, decreasing the likelihood of future bailouts. Earlier laws addressed different issues—Glass-Steagall in the 1930s separated commercial and investment banking, Gramm-Leach-Bliley in 1999 rolled back parts of that framework, and Sarbanes-Oxley in 2002 focused on corporate governance—without creating the comprehensive post-crisis framework this 2010 reform established.

Financial regulation after the Great Recession aimed to reduce systemic risk and end taxpayer-funded bailouts. The law enacted in 2010 does exactly that by expanding regulators’ powers, creating new oversight bodies, and instituting rules for both large banks and nonbank financial firms. It formed the Consumer Financial Protection Bureau to guard consumers, established the Financial Stability Oversight Council to identify and monitor systemic risks, and required stress tests and living wills for big institutions to test their resilience and ensure orderly wind-downs. The Volcker Rule limits certain high-risk trading activities by banks, further reducing the chance that a single firm’s troubles could threaten the whole system. Collectively, these provisions are designed to make the financial system more transparent, accountable, and stable, decreasing the likelihood of future bailouts. Earlier laws addressed different issues—Glass-Steagall in the 1930s separated commercial and investment banking, Gramm-Leach-Bliley in 1999 rolled back parts of that framework, and Sarbanes-Oxley in 2002 focused on corporate governance—without creating the comprehensive post-crisis framework this 2010 reform established.