February 04, 2017 – President Trump has issued an order for a complete review of Dodd-Frank Reforms Act. Democrats and many experts are criticizing this decision. They believe that this reforms bill added some much-needed rules in the highly unregulated financial sector. The lack of transparency and management in the financial sector paved the way for the crisis of 07/08.
In the aftermath of 2008 crisis, the Obama administration took the first step to regulate the financial market. Banks and big businesses have exploited the financial market for their own gain, for decades. This lack of regulation of banks and other financing institution caused one of the biggest disasters the world has ever seen; in the form of the great recession of 2007/2008. The Obama administration introduced the Dodd-Frank Reforms Act to make it tougher for banks and other major players to exploit the financial markets. If you read what’s inside Dodd-Frank bill, you most probably won’t understand a lot of stuff it talks about.
In wake of the Dodd-Frank Reforms bill, several regulatory agencies were created. Their job is to monitor and regulate different financial institutions and instruments. Trillions of dollars’ worth of currency trading [also known as Forex Trading] is done every day; this crowd includes small traders as well as big players like Banks. Big banks are providing liquidity to brokers for different leveraged products; they have their feet deep in this game. Banks have several advantages in the currency trading, like they get to be the market-makers and they can execute trades faster than traders who are using Forex brokers for trading. It is a known fact that banks often trade against the customers, or other traders, hence there is always a conflict of interest.
Banks can also use the trading data from different brokers to execute trades that have high chance of winning. They also have the luxury to execute trade much faster than an average trader does. Some reports indicate that many banks are using automated programs to execute profitable trades. These programs use sophisticated algorithms and data from different forex brokers to execute profitable trades; this is a luxury only banks have and average traders can never compete with them.
Dodd-Frank Reforms Act also adds additional checks for asset backed securities. Big banks and financial service providers were selling different kinds of assets-backed-securities before the Great-Recession. Some of these products were backed by mortgages, so when the housing bubble busted in 2007/2008, it took the banking sector with it as a lot of mortgage backed securities became worth-less. Trump is a businessman and he probably has many wealthy friends in Wall Street and other big financial institution. It seems to me that Trump ordered this review to make his friends happy…