These legislation were passed to promote the fiscal stability of the United States by improving accountability and transparency within the financial system also strengthening the control over large corporations (Cooper 6). Dodd-Frank, one of the regulations passed, was “designed to protect the American taxpayer from undue economic burdens through the need to provide financial support to banks and other budgetary intermediaries that may encounter difficulties because of poor or fraudulent investments.” (Barrell 12) When banks fail, taxpayers usually provide financial backing, so having strict regulations, such as dodd-frank, potentially make US major financial markets strong enough to withstand both system-wide stress and the failure of one or more large institutions. This reduces the risk of banks failing, and reduces the taxpayer 's stress and burden, also preventing taxpayers to choose between bailouts and financial collapse. Some regulations set for the insures were done by the U.S. Treasury. On June 17, 2009, the U.S. Treasury released a document outlining proposals for financial regulatory reform. The document attributes much of the blame for the financial crisis to the failure of large, highly leveraged, and interconnected financial firms, such as AIG and other insurers. It proposed …show more content…
An overriding goal of any financial regulation in response to the 2008 financial crisis was to avoid extending explicit or implicit too-big to-fail policies. The Treasury on July 22, 2009, proposed specific legislation, “Title V - Office of National Insurance Act of 2009,” (Inquiry Commission) for creating the Office of National Insurance (ONI) to “monitor all aspects of the insurance industry.” (Friedman 35) As proposed by this act, the ONI would recommend the Federal Reserve that insurers, due to risk exposure, should be designated as Tier 1 FHCs or companies that pose a threat to the financial stability of the US during the time of economic stress and strictly regulated by the Federal Reserve (Hoshi). The ONI would also collect and analyze the financial information on the insurance industry, with broad power to compel insurers to produce data in response to its requests (Hoshi). The ONI would have broad authority to preempt any state regulations that were deemed inconsistent with such agreements (Hoshi). The information collecting, representative, and preemptive features of this treasury bill reflects the bill’s effectiveness by preventing large corporations and banks taking morally hazard decisions. Along with this the federal government also created