What is the primary purpose of the Dodd-Frank Act?

The primary purpose of the Dodd-Frank Act is to implement financial regulatory reforms aimed at reducing risks within the financial system. Enacted in response to the 2008 financial crisis, this legislation was designed to address the issues that contributed to the crisis by increasing transparency and accountability in financial markets. It established mechanisms for monitoring systemic risk and implemented important reforms for various financial sectors, including derivatives and consumer financial products.

The Dodd-Frank Act also created the Consumer Financial Protection Bureau (CFPB), which focuses on protecting consumers in the financial sector, but its core mission encompasses broader financial stability and risk reduction. By instituting strict regulations and oversight, the Act seeks to prevent future financial crises and ensure a more stable economic environment.

While other options address elements of the financial landscape, they do not capture the foundational intent of the Dodd-Frank Act as effectively as the correct choice. For instance, while enhancing consumer protection laws is an important aspect of the Act, it is a subset of the larger goal of implementing regulatory reforms across the financial sector to reduce risks.