The risk of subprime loan and what measures have been taken to deter this from occurring in the future cont.

  • Eliminate the office of the Thrift supervision and give broader authority to the Federal Reserve to regulate all large financial institutions.
  • Establish a process for the federal government to liquidate the asset of large failing financial institutions.
  • Create a financial stability oversight council to be on the lookout for risks to the financial system.
  • Required companies selling asset backed securities to retain a portion of those securities so the sellers share part of the risk.
  • Provide federal regulatory oversight of mortgage-backed securities and other derivatives and require that they be traded on public exchanges.
  • Establish a stronger consumer financial protection role for the Fed through creation of the Bureau of Consumer Financial Protection.

This new act was designed to send a strong message to stockholders, bondholders, and executives of large financial corporation that they will suffer unavoidable and extremely high personal financial losses if they allow their corporations to ever again get into serious financial trouble. Thiele, C. (2012)

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