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Dodd Frank: A Review and Analysis from the Perspective of Small Financial Institutions - Essay Example

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Dodd Frank: A Review and Analysis from the Perspective of Small Financial Institutions

At face value and according to the politicians that so vigorously promoted the bill, it was intended and marketed as a means of reining the previously un-restrained financial greed that ultimately precipitated the financial collapse of 2007/2008. Yet, regardless of how well-intentioned the act might have been, the fact of the matter is that it ultimately served to integrate a great deal of harm with respect to the way in which smaller neighborhood/community banks could continue to remain viable and profitable under the terms that the Dodd Frank act specified. As a function of analyzing the different ways in which the Dodd Frank act has reduce the overall level of competitiveness and profitability/sustainability that small community banks can leverage within the current market, the following brief analysis will seek to elaborate on some of the most important aspects of the ways in which Dodd Frank has constrained and ultimately harmed the smaller banks. It is the hope of this author that by integrating an understanding of this particular topic, the reader can come to a fuller and more complete understanding of the way in which Dodd Frank has had profound impacts, both good and bad, upon the way in which the current financial markets within the United States operate. At face value, the Dodd Frank act was sold to the public as a means of taming what was referred to colloquially as “wall street titans”. However, the drawback of writing a bill that is specifically intended to do just that is the fact that the smaller banks, which defined many communities within the United States, have ultimately found it much more difficult to compete and abide by the recommendations and regulations that Dodd Frank automatically implies. This of course can be seen with regards to the scale of requirements, economic resources, time, and reporting standards that financial institutions are forced to comply (Petri 13). For instance, a large multinational bank or financial institution operating within the United States would need to devote some small percentage of overall personnel, time, and energy with relation to making sure that all aspects and regulations of Dodd Frank are in compliance. Conversely, with regards to a smaller community bank, it does not take a great deal of imagination to understand how and why they disproportionately larger number of man-hours and money would be necessitated in order to meet you same standards. Conversely, due to the broad overarching framework that defines Dodd Frank, the reader can understand that by very definition all banks fall under the rules and regulations that it applies. This is somewhat unfortunate due to fact that small community banks are by very definition not able to impact to such a degree or have the profound inter-market effects that Dodd Frank was originally written to protect against. As a function of this, it can be readily understood that the smaller community banks are unfairly penalized and caught up within the strict reporting requirements the Dodd Frank engenders. This of course strikes the very nature of specifically what Dodd Frank was intended to prevent against. Originally drafted as a means of protecting the United States financial markets from the unintended impacts of needing to bail out so-called “too big to fail” financial firms, the ancillary effect of all of the regulations the Dodd Frank contains serves to ensure that almost all financial institutions the United States will ultimately be large ones. By creating such a litany of rules and regulations, reporting guidelines, and compliance metrics, such an action nearly ...Show more


With so many government programs originally intended to provide an answer to prior shortcomings that have been found in key structural areas of the economy, the Dodd Frank Act of 2010 had a series of profound impacts upon the way in which banks and financial institutions integrate with business…
Author : hammespercival
Dodd Frank: A Review and Analysis from the Perspective of Small Financial Institutions essay example
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