Importance of the Wall on the Street Policy Signed by President Obama - Research Paper Example

? Table of Contents I ………………………………………………………………………………………3 II Introduction……………………………………………………………………………………4 III Origin of consumer protection rights………………………………………………………….5 IV Consumer protection laws (Act)………………………………………………………………7 V Consumer policy Challenges………………………………………………………………….11 VI Future development and laws needed………………………………………………………..13 VII Conclusion…………………………………………………………………………………..15 VIII References………………………………………………………………………………….16 Abstract Consumer protection has laws which are used to govern the consumers and also the traders. The consumer’s welfare is protected, and their rights are to be considered. Through consumer protection fraud and illegal activities are able to be avoided because some of the laws protect the needs of those who have no knowledge about their rights taking an example in a business where some firms use the advantage of their size over others. Through the laws installed in the country there exists a fair deal and assists in the consumer in making better decisions in the market place (Acharya 26). People like investors, those in need of mortgage are able to be clear on what their rights are before involving themselves in companies or people who will deceive them. These includes the government organizations and also the self-regulating business organizations such Federal Trade Commission among others. The consumer protection rights have been seen to grow over the years from the 19th century which people saw the need for this from the fraud seen in the mail to what we see to date. This assists in the protection of both consumers and businesses in the operation of their works.9Through consumer protection people are able to use the law in reporting cases like illegal acts and works done against the law. They are therefore, said to protect the welfare of people in making fair deals and transparency to the services and businesses conducted. The consumer rights are also put to protect the environment and the welfare of people’s health. Some industries produce toxic products which leads to the retrogression of the health conditions of people like the Cigarettes and also the environment like the global warming effect (Li & Palumbo 23). Introduction There are several consumer protection acts in the American government and in this context we are going to use the Dodd-Frank Wall Street reform and consumer protecting in establishing his acts, the benefits of the consumer protection laws and be able to tell the rights the consumers are eligible to. 1 The Dodd-Frank Reform and Consumer Protection Act is mainly n the financial crisis in America which started in 2007.It is an act imputed on the financial services to the banks and non- banking holding companies which include insurance companies, security firms and also international banks among others within and globally (Stowell 25). The Dodd-Frank Act leads to the change in financial services regulation creating a new federal authority and also a new financial consumer regulatory body. This act was approved in 2010 and became effective from 22nd July (Braybrooke 19). This legislation was put in place of all the financial activities within the States and also non-US banking organization firms. The main features in the legislation included maintenance of financial stability by creating a council which is given the mandate to overlook on the activities in the financial system. It also gives the Federal Deposit insurance Corporation to be able to control the firms which are failing by protecting the counterparties which leads to the losses incurred by the counterparties and shareholders.5The Dodd-Frank act also enables the consumer protection by putting up a transparent and independent bureau in the consumer financial regulation. In this Act we also see that it enables the accessibility to banking services and enabling those people with low income and low level of standard people being able to get the bank services.4 Origin of consumer protection rights Consumer protection rights started in the 19th and 20th century in the United States of America. This started in the mail industry where there was fraud in the types of orders made. This thereby led to the formation of the fraud law where any person liable to mail fraud was punished. Although it was not taken seriously at its legislation as some continued to go against the law (McEachern 93). This was then followed by the Sherman Anti Trust Act which was passed in 1890 which limited the formation of cartels and monopolies.6During this period of time in the 19th century the acts put in place for the consumers were not taken seriously as they still continued to go against the rule the different only being that it had reduced (Krebsz 41). It was in the 19th century in 1906 that things changed from the book Jungle by Upton Sinclair who described the bad conditions experienced in the meat packing industry which was dirty with a lot f rats some which died there and mixed with the meat which was stored in piles. The packaging industry was not considerate to the effect of the meat to consumers as it contains germs which could contaminate the consumers.9 This led to the passing of the Food and Drug act and the passing of the Meat inspection act to be used in the inspection of the kind of meat and medicines being sold to consumers. President Theodore Roosevelt created these laws as he was very disappointed on finding out on these conditions as confirmed by the federal agents. This later led to the formation of the Federal trade commission in 1914 which was used in the marketplace against deception. In 1930s during President Roosevelt rein the lawmakers at the local, state and federal level created regulatory agencies which were used in defending the consumers and also the citizens from the financial and industrial groups. In 1914 there was the formation of the Food and Drug Administration which was used in testing the types of drugs that were given to consumers to ensure safety. In 1960’s Rachel Carson published the book ‘Silent Spring’ which was about how the DDT chemical was affecting the food chain. She was a biologist and in her book she was able to show how the toxic residues were found in the woman’s breast which led to the Environmental Protection agency. 6 This concern continues to grow to date like the effect of chemicals to the environment which includes global warming and has to be controlled (Sobel 34). The next people to be involved in the consumer protection rights came about in 1962 by John Kennedy who defined consumer rights in his speech being able to bring change in the consumer rights (Sutherland & Canwell 18). In 1962 he established the Consumer Bill of Rights in the American congress; in 1965 he led to the legislation of the Cigarette Labeling Act which was followed by The Fair Packaging and Labeling Act in 1966 and the wholesome Meat Act with the establishment of Consumer Safety Commission. Ralph Nader later published a book in 1966 known as ‘Unsafe at Any Speed’ which showed neglect by the car makers in the car making as they only focused on styling which later led to the National Traffic and Motor Vehicle Safety Act in 1966. He is the one who led to the establishment of the Occupation safety Act and consumer Product Safety Act. From is where the other consumer protection rights followed. 6 Consumer Protection law Ending “Too big to Fail” Bailouts Too big to fail bailouts is used in encouraging bigger companies being able to take bigger risks which are more extensive thereby leading to the smaller companies finding it difficult to compete with them making the banks grow inefficiently. Dodd-Frank wall on the street Reform tries to end this as it focus on the regulation and also the supervision to be put in place in order to prevent the excessive risks taken by the bigger companies.2 In his wall on the street reforms he tries to find financial ways which should be put in place in order to reduce this type of systemic risks which may lead to the banks or bigger industries failure. In his act he tries to point up on ways which can be put in place to prevent this although it has been not easy for policies to be implemented. He states that for a failing financial company the taxpayers should be protected from the losses incurred during its liquidation (Cartwright 21). This is because most of the companies take bigger risks and when they fail to grow or does not lead to its profitability it leads to the failure in the company. This therefore can be directed to the taxpayers who are made to pay for what they should not pay. It is in this act that states that there will be a liquidation mechanism put in place which will be used to show the failing financial companies. 4 This enables the losses to be taken by both the shareholders and the unsecured creditors. It also enables the FDIC and the Federal Reserve to be in an agreement before the liquidation of a company (McLachlin 48). The act discourages excessive growth and complexity. Many companies want to expand in terms of size growth rate (Churchman 45). This therefore should be monitored as most of them take bigger risks to the financial system without consideration of risk management or its decline in the future which may be caused by a decrease in the market, shareholders or other reasons. This therefore led to the Financial Stability Oversight Council which is placed to monitor the systemic risks and make recommendations to the Federal Reserve in checking on the capital and leverage among others measures in the financial system.8 The Volcker Rule is also a requirement used to control the banks, its affiliates and also other holding companies in investment ,trading and also limits the relationship between hedge funds and the private equity funds. The council is used as a regulator to the bank financial institutions and non-banking financial institution in order to help on the regulators control. It bars activities which are not permitted that are a banking entity from engaging in proprietary trading and also be able to acquire or retain any partnership, equity or ownership.9It also enables a banking entity or a non-banking financial company to provide brokerage services to a sponsored fund if the officer in charge certifies the compliance (Spencer 61). The End too big to fail Bailouts also used by the council to have the ability over non bank financial companies that lead to the risks of the States financial stability to be able to submit supervision by the Federal Reserve (Copeland 19). This enables them to be monitored in case of its failure in the future. The Federal Reserve will be able to see if the company is going to fail or to be termed bankrupt and thus it assists in controlling the financial stability of the nation. The act prohibits on mergers and acquisitions for financial companies which include the non- bank financial companies and foreign banks in the United States among others where the firm’s liability exceeds a ten percent of the aggregate liabilities of all the companies in the country (Nadel 56). This was a change as the previous limit was only implied by the banking companies and deposits of the Insured depository institutions. The act also adds to the bankruptcy policy whereby all companies which fail financially or are opt to close down have to undergo the bankruptcy process. This will enable most of the companies to reduce the risks undertaking as there is a control measure regarding to the bankruptcy of a company.1 The bankruptcy act is also useful in case a company goes bankrupt and has debts. This will make it easier for their debts to be settled without constraints from the creditors. Dodd-Frank’s act also limits the debt to be incurred by companies. This is to prevent the bank failure. The FDIC has the mandate to guarantee debt under some rules which include that two thirds of the board and the FDIC board determines what can lead to the financial stability, the terms and conditions should be approved by the treasury secretary and also guarantees the amount and finally the president activates the process for its approval (Eiler 55). The Federal Emergency lending in Dodd’s Act prohibits the bailing out of an individual company. The lending program is approved by the secretary treasury which should not be for a failing financial company and be able to protect the taxpayers from incurring the losses of the company.5The act also suggests on the taxpayers not to be included in the costs for liquidation of the company (Gup 29). This act makes it difficult for the financial institutions to put their losses to the taxpayers but should and be able to complete their debts. All bank holding companies of over fifty billion dollars are referred as systemically important financial institutions according to the act. The Financial Stability Oversight Council is the one in charge of nonbank financial institutions such as systemically important financial institutions (SIFIs) which are supervised by the Federal Reserve which are subject to the systemic risks.9 This act also states that there should be a framework to be used in risk management standards. This should be in uniform for the importance of the financial market utilities as there will be an order during payments, settlement and also in the clearing when conducted by the financial institutions. 8 In the funeral plans he states that a company should submit their plans periodically incase the company fails to which their failure to do that will lead to higher capital requirements and also will be restricted to its growth and activity.1 Through these plans submitted there will be able to be monitored and be able to be understood in its regulation where the plans are not credible it will lead to more costs being incurred (Horvath et.al 39). Consumer Policy Challenges Consumer Awareness and Education on the consumer protection have not been able to cover every part. The banking and non-banking financial industries which are either big or small should have Knowledge about the new acts of Dodd-Frank which will help them be able to assist them in decision making. Through the proper training period on the new laws and acts it will enable companies be able to reduce costs in taking bigger risks and also assists the tax payers on understanding their rights instead of being used in the losses of the companies. This should also be established to the taxpayers. It is from proper development that would lead to the advancement in the financial growth. Through proper education each person is aware of the financial industries and be able to make better ideas and decisions. There should be enforcement strategies to be put in place to make the acts more effective. Some of the CEO’s or the leaders of bigger companies are ignorant and so the Federal Authority should be strict in the implementation of these laws in order to protect the tax payers from the effects of the failing companies.10This also improves the economy’s financial state as there will be control over the financial institutions within countries and also those from abroad but in the American market (Anand 27). The Financial Oversight Company should also undertake its mandate to oversee the non-banking financial institutions. These are under bodies should enable to engage all financial industries whether small or big undergo the rules from Dodd-Frank’s wall n the street to protect the taxpayers. The changing demanding markets for consumers should also be considered thus the financial industries being controlled on the types of risks they plan to undertake. This can be illustrated by a company which is trying to be competitive in the market with fewer customers. In order for it to grow it should be able to control itself from failing by avoiding taking risks which they may not be able to settle their debts because they will need to pay the workers even when the profit is at a declining level. This may lead to its failure and later becoming bankrupt which may affect the shareholders. They should therefore be able to control their demands and work at their level. Technology has also contributed to the consumer protection policy since there is the involvement of Internet. Some of the transactions take place through the internet which has led to many issues as they enter into contracts without any knowledge. 10 This is therefore difficult in monitoring the online banking and non-banking financial institutions. Some people will still be taken advantage of and forgery activities are often experienced. Future Development and laws needed The use of Arbitration clauses should also be considered as these laws are ignored. This will help the understanding of the acts which are put in place and are also useful in the consumer protection policies. Most of the financial acts have been put in place in the past and have not been implemented and the financial agencies should be able to ensure that the acts are still being used by both the country’s financial institutions and the other industries which settle in the country.6 Through this there will be a flow of the acts to be implemented by the Federal body and also other financial watchdogs. There should be a body put in place to assist the accessibility to appropriate and affordable financial services which will assists the consumers in the short run and long-term decision needs. This will be useful in both the country and consumers as by making proper decisions there will be an increase in the financial growth. Ensuring people are making the right financial decision which will protect them in both the present and future. There should be acts enforced over the Internet in order to protect the consumers or the financial institutions which are dependent to the Internet. This is because some of the financial industries are not following the rules put in place in protecting the customers. The acts should also be put up in order to improve on the services being offered over the Internet for some failing companies and also others which are bankrupt. The Financial Consumer protection Acts should act fairly on the services they offer to the people. This is because some people are not dependent to it as they find it corrupt. In Dodd’s-Franks wall on the street act on an independent and transparent body in the financial industries should made to work effectively and used in controlling and governing the small and bigger industries. The government should also be ready to improve the financial literacy among people. This will help the consumers be able to understand the financial institutions they are liable to and also in making decisions. It improves their knowledge and skills against fraud or unjust by bigger companies. This will be able to help the smaller companies get ideas n becoming competitive in the market and also be able to educate them on types of risks to be undertaken. There should be an improvement on education to people about the financial operations. The taxpayers are able to account for their money and be able to know what is important or not. They will also be able to report illegal activities by the financial institutions making the industries producing transparent services. There should be the development in the financial sector for it to be accessible by everyone. This development will enable everyone being able to access to the financial companies rather than discriminating others.6Through this there will be an improvement in the financial industry as it will lead to its growth the controlling bodies in place. Industries like the banking industry should be diverse to cater the needs of all the citizens. The non-banking financial industries should also not be left behind as this may also lead to their growth (Sen & Mukhopadhyay 72). How did they solve the problem/issue? Were the solutions enough or not / or do they need to implement some more solution? The problem was solved by implementing the Frank-Dodd Act; this was enough to alleviate the situation at the time. In future, however, it will be necessary to institute other more effective measures in order to ensure that efforts made will have long-term significance. New policies, regulations and acts should be put in place as a way of maintaining and sustaining progress that has been made. Conclusion From this we have been able to see the importance of the wall on the street policy signed by President Obama. It has been able to put control over the bigger industries with extensive risks which will help the smaller financial industries.5 The development of the consumer protection industry has grown over the years and the act improved in the protection f both consumers and businesses (Ueno et.al 33). The Dodd’s-Frank act had enabled most families being able to buy houses as before the mortgage industries used to take advantage of the citizens for lack of knowledge which prevented them from so.2The overdraft fees have also been able to be controlled through the new acts which have been able to secure them. The companies have also been able to controlled n putting their failing financial to the taxpayers and through this they have been secured. The financial stability bodies put in place have also made it easier for the acts to be acted upon and followed. Notes 9Stowell, David, and David Stowell. Investment Banks, Hedge Funds, and Private Equity. Waltham, MA: Academic Press, 2012. Print. 2Anand, Sanjay. Essentials of the Dodd-Frank Act. Hoboken, New Jersey: Wiley, 2011. Internet resource. 5Gup, Benton E. Too Big to Fail: Policies and Practices in Government Bailouts. Westport, Conn.: Praeger, 2004. Print. 6Horvath, August, John Villafranco, and Stephen Calkins. Consumer Protection Law Developments. Chicago, IL: ABA Section of Antitrust Law, 2009. Print. 6Horvath, August, John Villafranco, and Stephen Calkins. Consumer Protection Law Developments. Chicago, IL: ABA Section of Antitrust Law, 2009. Print. 10Ueno, Yu?ko, Magdalena Olczak, and Yoshiaki Takahashi. Promoting Consumer Education: Trends, Policies, and Good Practices. Paris: OECD, 2009. Internet resource. 1Acharya, Viral V. Regulating Wall Street: The Dodd-Frank Act and the New Architecture of Global Finance. Hoboken, N.J: John Wiley & Sons, 2011. Internet resource. 8McEachern, William A. Economics: A Contemporary Introduction. Mason, OH: South-Western Cengage Learning, 2012. Print. 5Gup, Benton E. Too Big to Fail: Policies and Practices in Government Bailouts. Westport, Conn.: Praeger, 2004. Print. 9Stowell, David, and David Stowell. Investment Banks, Hedge Funds, and Private Equity. Waltham, MA: Academic Press, 2012. Print. 1Acharya, Viral V. Regulating Wall Street: The Dodd-Frank Act and the New Architecture of Global Finance. Hoboken, N.J: John Wiley & Sons, 2011. Internet resource. 5Gup, Benton E. Too Big to Fail: Policies and Practices in Government Bailouts. Westport, Conn.: Praeger, 2004. Print. 1Acharya, Viral V. Regulating Wall Street: The Dodd-Frank Act and the New Architecture of Global Finance. Hoboken, N.J: John Wiley & Sons, 2011. Internet resource. 9Stowell, David, and David Stowell. Investment Banks, Hedge Funds, and Private Equity. Waltham, MA: Academic Press, 2012. Print. 4Copeland, Curtis W. Rulemaking Requirements and Authorities in the Dodd-Frank Wall Street Reform and Consumer Protection Act. Washington, D.C.: Congressional Research Service, 2010. Print 6Horvath, August, John Villafranco, and Stephen Calkins. Consumer Protection Law Developments. Chicago, IL: ABA Section of Antitrust Law, 2009. Print. 9Stowell, David, and David Stowell. Investment Banks, Hedge Funds, and Private Equity. Waltham, MA: Academic Press, 2012. Print. 6Horvath, August, John Villafranco, and Stephen Calkins. Consumer Protection Law Developments. Chicago, IL: ABA Section of Antitrust Law, 2009. Print. 4Copeland, Curtis W. Rulemaking Requirements and Authorities in the Dodd-Frank Wall Street Reform and Consumer Protection Act. Washington, D.C.: Congressional Research Service, 2010. Print 8McEachern, William A. Economics: A Contemporary Introduction. Mason, OH: South-Western Cengage Learning, 2012. Print. 2Anand, Sanjay. Essentials of the Dodd-Frank Act. Hoboken, New Jersey: Wiley, 2011. 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