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Dodd-Frank Act. Obama's New US Financial Restrictions on Banks - Mini Exam

The US Senate just recently passed a new set of reforms put forward by President Obama restricting banks. This free mini exam will help you learn new changes to the law.

Every month we create update questions, so keep coming back if you want to be in the loop.

Here's 5 questions, on the new US .

Dodd-Frank Act- July 2010

1. The Dodd-Frank Act has created which new organisation?

Answer: C

A key characteristic of the financial crisis was the sudden realisation of financial institutions that they faced a liquidity crisis - or - ran out of cash in normal language. Companies like Bear Stearns, owning huge exposures to other financial companies, created havoc when they suddenly realised they needed cash. They then called the US government to unsuccessfully raid the taxpayers piggybank!

However, the new Orderly Liquidation Authority is tasked to identify companies heading down the river towards the financial waterfall, and then orderly managing the companies liquidation so, in theory, less chaos and fear is passed to the wider financial markets.

Personally, I'm not sure how this will work. Do you imagine either Fred Goodwin or the Bear Stearn's guy, running organisations that don't legally massage the figures in the best possible light? Their downfall was that their organisations mispriced risk. How will the goverment do better? By the time the government identifies the rapids, the ship will likely be over the waterfall. But this is only my opinion. The new authority certainly creates plenty of jobs for esteemed 'retired' bankers. Phrases like "Blind leading the blind" and "Poacher turned gamekeeper" spring to mind. What a cinic I am.

Incorrect Answers

Answer B, A and D! Surprise, surprise, I made them up.

2. What new bureau is being created?

Answer: D is correct - Consumer Financial Protection Bureau

Incorrect Answers

Answer A, B and c :

For Question 3, please scroll down.

Follow this link for question 3: What powers do the Financial Stability Oversight Council have?