The Dodd Frank Act is sometimes mistakenly called the Frank Dodd Act. The official name is the Dodd-Frank Wall Street Reform and Consumer Protection Act, and it was introduced by President Obama in July of 2011 as a direct response to the financial crisis that nearly brought the country, and indeed the global economy, to its knees back in 2008. The Frank Dodd Reform Act was named after republican Barney Frank and Senator Chris Dodd who presented the idea to President Obama, and was a way of bringing about control that placed the regulation of the financial institutions firmly in the hands of the government. It is believed that by doing this, circumstances that should have been predicted and foreseen prior to the global meltdown of 2008 will now be seen coming at them a mile away, and adverse action can be taken to avoid another financial catastrophe.
Qui Tam Whistleblower Laws
In order to for things to improve President Obama believed that things had to monitored from the inside. Prior to the banking collapse the financial institutions were pretty much 'untouchable', an almost secret society if you will. For the Frank Dodd Act to work, he needed everyone to be on board, so the government needed some way of internal reporting, and this is where the Qui Tam Whistleblower laws came in.
Qui tam is Latin and is short for 'qui tam pro domino rege quam prose ipso in hac parte sequitir' which translated means 'he who sues in this matter for the king, does so for himself also'. What this really means is that anyone who exposes fraud committed on the government (in this case financial irregularities) can bring about a lawsuit under the guise of 'qui tam' on behalf of the government. If successful they will receive a share of the money recovered as a reward (generally from 15% to 25%). This is also known as a 'whistle blowing provision'. By cleverly bringing in the qui tam laws the government is in essence giving people an incentive to take control of the situation from within or essentially to be the government's eyes and ears on the ground. An example might be an employee who works in a pharmaceutical company who is aware that her company is promoting off-label use of a drug to doctors. This is illegal and could constitute a whistleblowing case.
If you’ve seen something at your company that you think doesn’t look right, it’s in your best interest to contact an experienced qui tam attorney. These are complex laws, and it can be hard to know how to proceed. It’s free to talk to one of our attorneys, and we handle cases across the U.S. from all 50 States. You can call us toll free at 1-888-204-1014 and talk directly to a whistleblower lawyer. This is a win win where you can both do the right thing, and also get paid a monetary reward for doing so.
Summary of Frank Dodd Act
Prior to the financial crisis the banks had no centralized regulatory body to oversee what was happening and as a result were allowed to do as they wished. The fact that they were allowed to trade at will meant that slowly but surely the large conglomerates of the US banking system drove the American economy into the ground, albeit with a little help from rising interest rates, and the bursting bubble of the once buoyant housing market. Many now believe that lending money to people who were already maxed out on credit was not only crazy, but also completely irresponsible. Consequently as the credit crunch started to take hold, more and more people were defaulting on loans that had been given out to them with little thought, and before long the financial institutions were in trouble to the tune of multi billions of dollars.
Among the wide spread changes to the financial system were a sweeping overhaul of how the institutions be governed and Obama proposed laws such as:
- The complete consolidation of all regulatory agencies into one body
- The complete regulation of all financial institutions that will bring about total transparency and accountability
- Financial protection for consumers by the Consumer Financial Protection Bureau (CFPB) who will offer advice on credit scoring, mortgages and risky borrowing.
- Tools put in place for managing a crisis including a 'resolution regime' that will put action plans in place to ensure a smooth transition through such a crisis.
- Various controls put in place to make sure that the rules and regulations of financial lending are adhered to.
Later on Obama also asked the government to pass the Volcker rule. This is a law put in place that heavily restricts the financial institutions from making any type of speculative investments that in no way benefit their customers. This ruling is said to be implemented on July 21st 2012.
The bottom line is that after a thorough investigation by the Financial Crisis Inquiry Commission into the monetary crisis of 2008, it was discovered the main cause of the melt down was due to a widespread failure and indeed a complete abuse of monetary regulations. This is not something that President Obama was ever going to sit back and simply shrug his shoulders, or cross his fingers and hope that it never happened again. Instead, he had to put plans in place to make sure that it didn't.
Aside from the commission for regulation, the qui tam laws make certain that the government has all their bases covered from the inside out. However although a majority of people see it as a good move, it is the largest piece of financial legislation since the great depression of the 1930's and as a result there is also plenty of opposition to the bill. For example, many people are saying that it is way too restrictive and will only be seen to stifle any plans the US has to expand overseas, thus weakening the American economy in the long term. Others see it as an expensive counter action to a lesson supposedly learnt.
For now Obama has his hands firmly on the reigns of the financial institutions and like a small child who has already strayed off unaided, he certainly isn't going to let this happen again. That said it has been a year since the Frank Dodd Act was brought into play so have things really changed?
Well, it has to be said although unemployment has remained high, the Dow Jones is up around 20 % since June of 2010 and indexes of small company stocks have also increased by around 30%. The excessive risk taking strategies that were initiated by Wall Street prior to the melt down that only fuelled the chaos, have been well and truly stifled. Now there is a surer and calmer approach to how Wall Street trades as the government look on. The Frank Dodd Reform Act is a powerful piece of legislation and love it or hate it; it certainly looks as if it's here to stay.Frank Dodd Act Articles