During the summer and fall of 2008, a financial crisis exploded that threatened to plunge the world into an economic meltdown similar to, or worse than, the Great Depression of 1929 and ensuing years. The crisis was triggered by a drop in home values, which in turn triggered a cascade of mortgage defaults, particularly with regard to the subprime and Alt-A mortgages. Many of these mortgages had been rolled into various forms of mortgage-backed securities and sold to the public, including financial institutions. The crisis triggered three major pieces of legislation.
TARP and the stimulus bill were reactive in nature, seeking to stem and reverse the ongoing financial and economic crisis. What was needed next was a proactive legislative response, aimed at preventing future crises. Congress responded by enacting the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). It should be clear from the foregoing data that the United States cannot weather another financial crisis of the current magnitude for the foreseeable future. After the New Deal legislation in the 1930s, this country went almost fifty years before the next crisis, the savings and loan debacle in the 1980s. This is a pattern of stability that, hopefully, Dodd-Frank can replicate. This Article will analyze Dodd-Frank from the perspective of whether it would have prevented the current crisis had it been in place at the start of the 2000s and whether its scope is sufficiently broad and rigorous to prevent other crises that are not clones of the present meltdown.
Charles W. Murdock, The Dodd-Frank Wall Street Reform and Consumer Protection Act: What Caused the Financial Crisis and Will Dodd-Frank Prevent Future Crises, 64 SMU L. Rev. 1243 (2011)