"Beginning in 2007, U.S. financial conditions deteriorated, leading to the near-collapse of the U.S. financial system in September 2008. Major commercial banks, insurers, government-sponsored enterprises, and investment banks either failed or required hundreds of billions in federal support to continue functioning. Households were hit hard by drops in the prices of real estate and financial assets, and by a sharp rise in unemployment. Congress responded to the crisis by enacting the most comprehensive financial reform legislation since the 1930s.
Then-Treasury Secretary Timothy Geithner issued a reform plan in the summer of 2009 that
served as a template for legislation in both the House and Senate. After significant congressional
revisions, President Obama signed H.R. 4173, now titled the Dodd-Frank Wall Street Reform and
Consumer Protection Act (P.L. 111-203), into law on July 21, 2010.
Perhaps the major issue in the financial reform legislation was how to address the systemic
fragility revealed by the crisis. The Dodd-Frank Act created a new regulatory umbrella group
chaired by the Treasury Secretary—the Financial Stability Oversight Council (FSOC)—with
authority to designate certain financial firms as systemically important and subjecting them and
all banks with more than $50 billion in assets to heightened prudential regulation. Financial firms
were also subjected to a special resolution process (called “Orderly Liquidation Authority”)
similar to that used in the past to address failing depository institutions following a finding that
their failure would pose systemic risk.."