What is the purpose of the Dodd-Frank Act?

The Dodd-Frank Act was enacted in response to the financial crisis of 2008, with the primary purpose of promoting financial stability through improved regulatory oversight of the financial system. It aims to address issues that contributed to the financial collapse, enhancing consumer protection, and increasing transparency in financial transactions.

One of the key features of the Dodd-Frank Act is the establishment of several regulatory bodies, such as the Consumer Financial Protection Bureau (CFPB), which focuses on protecting consumers in financial markets. The act imposes stricter regulations on large financial institutions, requiring them to maintain higher capital levels and conduct stress tests to ensure they can withstand economic downturns. Through these measures, the Dodd-Frank Act enhances oversight and accountability within the financial sector, thereby striving to prevent future financial crises and promote overall economic stability.