Capstone Accounting

CAPITAL INVESTMENT DECISIONS

ADRIANA MARIA QUANSAH

PROFESSOR RALPH J PALUMBO

CAPSTONE GRADUATE ACCOUNTING

(ACCOUNTING 599)

DATE: MAY 5, 2013

Senate on May 20. The bill was reformed by Congressman Barney Frank and approved by the house on June 30. On July 21 2010, President Barak Obama signed the Dodd-Frank Wall Street Reform Act and Consumer Protection Act into law. Source: U.S. Senate, Dodd-Frank Wall Street Reform Act, Morrison & Forster, Summary of Dodd-Frank Reform Act).

The purpose of this Act was to re- regulate the financial industry in order to prevent another economic crisis. It emerged out of the great recession of 2008 to prevent the collapse of a major financial institution such as the Lehman Brothers. Prior to the Dodd-Frank Act, the banks particularly the commercial and investment banks had been deregulated starting in 1980 and culminating in 1999. “In 1999, the Glass-Steagall Act was repealed. The Glass-Steagall Act separated the powers of commercial and investment banking, which insured that banks would not take too much risk with depositors' money.

Republican Senator Phil Gramm helped write and pass the Gramm-Leach-Bliley Act of 1999 that repealed the Glass-Steagall Act. Another key player was long-time Federal Reserve Chairman Alan Greenspan, who was also a champion of bank deregulation.

After the repeal of Glass-Steagall, greed won out over prudence and banks did indeed take too much risk with their depositors' money. Between 1999 and 2008, Wall Street became less like the fabled financial district and more like the Las Vegas Strip. Even the regulation that still existed didn't seem to be working” Source: http://bizfinance.about.com/od/currentevents/a/How_Prevent_Financial_Crisis.htm

Changes in the lending regulatory environment, particularly with the enactment of the Dodd-Frank Act have to a large extent impacted on the bank’s ability to lend money to businesses for capital projects and acquisitions. The future growth of many...