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The Volcker Rule: Assessing Dodd-Frank 4 Years Later 

July 24, 2014
Ryan Bhandari, Equities

When the market crashed in September of 2008, many people believed it was the result of unchecked financial institutions that needed far more government oversight than they were actually getting. As a result of the overwhelming frustration of the American people and the feeling that the government needs to protect its people, the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed through Congress in July 2010.

The point of the Dodd-Frank Act was to eliminate “too big to fail”-the motto given to financial institutions capable of bringing down the entire financial system if they were to collapse. Republicans and Democrats rarely agree on anything, but they both subscribe to the idea that in order for the financial system to be secure moving forward, the US government has to eliminate “too big to fail.” But is this really an achievable task? Can government really put an end to this “too big to fail?”

It depends on someone’s view of the financial system. One school of thought is that the 2008 crisis was caused by a lack of good government regulation of financial institutions. The other school of thought is that massive commercial banks with so much of their money invested in so many areas of the economy are an inherent risk to the economy and government regulation cannot fix the problem. Therefore, they need to be broken up.

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