What is the Dodd-Frank Act?

The Dodd-Frank Act is a comprehensive piece of legislation enacted in response to the 2008 financial crisis, with the primary aim of reducing risks in the financial system. It introduced a plethora of reforms designed to increase transparency, accountability, and oversight of financial institutions, particularly those deemed "too big to fail." Key components of the Act include the establishment of the Consumer Financial Protection Bureau (CFPB), enhanced regulation of derivatives, and stricter capital requirements for banks. The overarching goal is to prevent a repeat of the systemic failures that led to the crisis, ensuring a more stable and secure financial environment for consumers and the economy overall.

This explanation underscores the Act's focus on safeguarding economic stability and protecting consumers from potential excesses and instability in financial markets, which is why this answer choice accurately reflects the purpose of the Dodd-Frank Act.