DODD-FRANK ACT

New Financial Reform
Although I received my financial education in Canada, I must admit that I was not familiar with the American Congress. Thus referring to my tweets, there was a confusion whether President Obama has signed Dodd-Frank Act. Answer; YES , President Obama has signed Dodd-Frank but the American senate is yet to do its part.

The point is April 21, 2011 when Dodd-Frank Act will be in action.

Reading comments from corporate jargon it is envisaged that the new act will not deter the next financial crisis expected in 2015. Past crisis tend to occur every 5 to 10 years. Beginning with the collapse of LTCM in 1997/98 then the mere crisis after 9/11 and eventually the events in December 2007 there is no full proof that Dodd-Frank Act would deter another financial crisis.

One loop hole in Dodd-Frank is the 150 billion resolution fund. Say in the future a firm is dismantle and 50 billion of the fund is used up, will those big firms have to inject another 5o billion to maintain a 150 billion fund or will it be sinking? How do we determine a firm as a threat to the economy? Maybe a company with lots of cash and invest it to buy liquid assets or a firm with healthy balance sheets but with less cash flow. I still consider GM & Chrysler a risk to the global economy because they are yet to repay their debts and obtain a reasonable debt to equity ratio. But we know both GM and Chrysler need no further restructuring. GM is on the right track to introduce an IPO. It will be nice to own some of GM's new IPOs.

Accruals and going concern