Whether you’re a whistleblower or just curious about the Great Recession, you’ll need to know more about the Dodd-Frank Act. The historic act changed the regulations on banks and other businesses. This act gave the government further regulations over banks and other businesses, to avoid another collapse like the one America saw in 2008.
But, how exactly did the Dodd-Frank Act come to be? While this act strengthen regulations and offers protections for SEC whistleblowers, knowing why it came to be can tell us even more about the act. By studying how the act came to be, we can better understand why it’s important and what it can do for us as consumers or workers.
The Great Recession
In 2008, plenty of things were going wrong in the world of finances. American went from a housing boom to the housing price index’s largest price drop in decades, the markets declined by thousands of points, and many Americans lost their jobs. Unfortunately, that meant that many financial institutions also collapsed.
When Lehman Brothers, the fourth-largest investment bank in America, collapsed, stocks plummeted, which left many businesses struggling. This recession affected the world over, and some countries, like Greece, eventually filed for bankruptcy after building up debt that the country couldn’t handle.
All this change meant that changes needed to happen, but what caused this plummet that led to the Dodd-Frank Act? While many factors played a part in the recession, the lack of regulations had a major impact.
A Lack of Regulations
Before 2008, regulations weren’t exactly at their strongest. Banks were failing because they were allowed to make underhanded tactics that hurt their customers. For example, many financial institutions were charging hidden fees or loaning funds to unqualified customers, leaving the customers struggling to pay back that money.
Because investors were taking advantage of certain oversights in the regulations, they were getting richer, but many banks were failing. This collapse led to bailouts, which impacted taxpayers who didn’t have the funds to make up for this deficit.
With all these failings affecting the people, making it difficult to find work, get a mortgage, or buy a house, something had to be done. That’s when the Dodd-Frank Act was created.
Protecting Workers from Securities Fraud
Financial regulations needed to change for one overarching goal: to prevent another financial collapse that would hurt the average person. This act meant that a lot of changes would need to happen, which included steps to assess the risk of certain financial institutions, to prevent them from going bankrupt.
This act also stopped many of the corrupt practices that led to the situation as it was. Predatory lending and securities fraud were all worsening the situation. As such, part of the Dodd-Frank Act was to provide protections for whistleblowers. This meant that workers could come forward about the practices their companies were engaging in.
Because of these regulations, which prevented further collapse and corruption, many Americans had the protections they needed to buy homes and seek employment. Now, banks have far stricter regulations, and the people have benefited from it.
Seeking Protection with the Dodd-Frank Act
Fortunately, this means that workers today have some protections as whistleblowers, meaning that they’re protected from retaliation if their employer tries to act. Whistleblowers have rights under the Dodd-Frank Act, and those rights still stand today.
While some action has been taken to weaken these regulations in recent years, these protections are still offered over the financial institutions that affect the average American. You shouldn’t have to worry about predatory fees and loans, and the Dodd-Frank Act should protect you and your family from these practices.