Primary issue
The Dodd- Frank Act has made the financial system stronger as protection of a future crisis by increasing private capital to absorb losses, creating a stronger financial system that is capitalized well to provide credits and reducing the misrepresentations associated with the too-big-to-fail problem. The Choice act was proposed by the current government as an alternative of Dodd Frank act, new regulation as proposed does not really reduces systematic risk to prevent another crisis. The current administration believes that to see a faster growth in economy and abundance of well-paying jobs, it is necessary to release business from burdensome regulations
As a consequence of the 2007-2008's the financial crisis, as a share of Dodd
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As an example, after Dodd-Frank, new securities appeared (future/swap hybrids) and collateral transformation. Another innovation is Bitcoin, that its identification itself as a decentralized bank (Byrne, 2017) and still there is not a specific regulation for it, but we know it could cause a crisis if not controlled. Monitoring and evaluating these new activities in the context of its effect on systemic risk provides an example of the regulatory collaboration at work, specially the predisposition for invention to expand the size of shadowing banking. (Tkac, 2013)
Selection of chosen solution
“Undiversifiable risk” or Market risk are names used for Systematic risk. There are many sources that can affect the entire system like war and recession, these risk causes can’t be avoided through diversification. In the other hand there are some actions that can be taken to prevent a crisis.
The first step is the ability to recognize the sector or industry that can produce a systemic risk and act on it; the government needs to impose a clear and restricted guaranty.
Also, there have to be a clear process for a bankrupt for any company including the ones too big to fail; with details of transition to restructuration or liquidation for failing