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When the Dodd-Frank financial reform act passed in 2010, it contained a number of provisions that many saw as no-brainers for a financial system that had just been brought to the brink of collapse by banks and other firms that were unable to determine the true value of securities on their books.
But one of the law’s rules, which gives the Federal Reserve Board back-up supervisory authority over entities that clear and settle derivatives trades, has created a concentrated center of risk in the financial markets that could require a federal bailout in the event of a crisis.
hen the Dodd-Frank financial reform act passed in 2010, it contained a number of provisions that many saw as no-brainers for a financial system that had just been brought to the brink of collapse by banks and other firms that were unable to determine the true value of securities on their books.
But one of the law’s rules, which gives the Federal Reserve Board back-up supervisory authority over entities that clear and settle derivatives trades, has created a concentrated center of risk in the financial markets that could require a federal bailout in the event of a crisis. Experts warn the law that was intended in part to do away with the concept of banks that are “too big to fail” may have created something else – clearing houses that are too big to fail.
- See more at: http://www.thefiscaltimes.com/Articles/2013/12/13/How-Dodd-Frank-Shifted-Risk-Instead-Burying-It#sthash.3pgA6ZC6.dpuf