THE DODD-FRANK ACT:
FRAMING FINANCIAL REFORM
A Directed Research Project Submitted to
THE FACULTY OF THE PUBLIC COMMUNICATION GRADUATE PROGRAM
SCHOOL OF COMMUNICATION
AMERICAN UNIVERSITY WASHINGTON, DC
In Candidacy for the Degree of Master of Arts
By Kathrina Maramba April 2012
TABLE OF CONTENTS
Abstract
3
Introduction
4
Literature Review
The Financial Crisis
6
The Dodd Frank Act
7
Problems and Concerns
9
Framing
10
Framing and Journalism
16
Problems in Business Journalism
17
Financial Literacy
18
Method and Procedure
21
Results
25
Discussion
30
Bibliography
39
Appendices
I. Codebook
43
II. Investopedia Glossary of Terms
45
III. Tables
47
2
ABSTRACT
On July 21, 2010, President Barack Obama signed The Wall Street Reform and
Consumer Protection Act into law. More commonly referred to as the Dodd-Frank Act
after its chief sponsors, Chris Dodd and Barney Frank, the Act was created in response to
the 2008 financial crisis which some claim to be the result of excessive risk speculation
promoted by financiers’ exploitation of a deregulated market.
This capstone examines how the Dodd-Frank Act has been communicated to the
public by print media a year and a half after its passage into law. Building upon a
literature review of theories on framing, frame competition and public financial literacy,
this capstone investigates two research questions that relate to the public’s understanding
of financial reform through the Dodd-Frank Act. The first research question examines
the frames used to report the Dodd-Frank Act. The second investigates to what degree
was the Act explained in print media.
Fifty-six New York Times articles from July 2010 to December 2011 were content
analyzed for political, economic reform and economic viability frames. Financial terms
associated with the act were identified and articles were examined for explanations of
these terms.
Among the project’s findings is that the presence of an economic viability frame is
particularly common in the discussion of the Dodd-Frank Act. Furthermore, a negative
valence in regards to the economic viability of U.S. banks and U.S.-based companies was
found to be prevalent among coded articles. Also noteworthy was that the financial
industry was the most commonly represented group within these articles reporting the
Dodd-Frank Act.
Implications discussed include the lack of background information present among
reports of financial regulatory reform laws and coverage of source representation in
public debates.
3
INTRODUCTION
The financial crisis of 2008 left the United States economy reeling in the
aftermath of frozen credit markets, taxpayer sponsored bailouts and financial misconduct.
Shortly thereafter, international financial markets followed suit as the U.S. market holds
substantial economic influence worldwide. In 2010, President Obama and Congress
endeavored to reform the U.S. economic system by passing the Wall Street Reform and
Consumer Protection Act, more often referred to as the Dodd-Frank Act, named after its
chief Senate and House sponsors Chris Dodd and Barney Frank. As its full title suggests,
the Dodd-Frank Act seeks to reform ineffective Wall Street regulations. The act also
aims to provide protection for consumers, all in an effort to prevent future financial
crises.
Though many provisions in the Dodd-Frank Act remain heavily debated, the act
itself is the most comprehensive and compelling endeavor undertaken by the federal
government in response to the U.S. financial crisis. In order to examine the Act’s rule
making success, I study how the Dodd-Frank Act and its components have been framed
in the media during the earliest stages of its passage.
Studies show framing affects the way an issue is interpreted and perceived by the
public. For example, lower socio-economic individuals may perceive the issue of climate
change as more important when it is framed in terms of public health instead of
environmentalism (Revkin, 2011). For the purpose of this capstone project, I assume that
any number of frames may be present within the articles that report on the Dodd-Frank
Act. These include political, economic reform and economic viability frames that may be
present in the reporting of the Dodd-Frank Act.
4
Additionally, this capstone seeks to examine how often financial jargon is used
and how often they are explained for general audiences. This capstone will also examine
if members of the public are considered in the media dialogue regarding economic policy
via mention of consumer advocacy groups in articles that report about Dodd-Frank.
In the wake of a national recession, financial regulation has been a point of much
debate. Will the American public favor regulation of financial markets to prevent future
catastrophes or will it favor deregulation in order to promote growth among international
competitors? Is the American public properly informed on issues and is it included in the
ongoing dialogue regarding economic policy? This capstone project endeavors to add to
the literature regarding these issues by examining media print coverage of the DoddFrank debate. It seeks to determine whether the public is give a chance to become
informed with thorough news coverage or if the coverage is solely a political debate with
a focus on key players of the debate.
5
LITERATURE REVIEW
The Financial Crisis
In 2008, several events unfolded that would greatly affect our national economy
and eventually, the global community. It began in March of that year, when the U.S.
government compelled the fire sale of global investment bank Bear Stearns to JP Morgan
Chase (Jost, 2012.) As investor revenue deteriorated beginning in 2006, Bear Stearns
increased their risk exposure in hopes of obtaining greater returns to alleviate these losses
(Wikipedia, n.d.) This included increased exposure to subprime mortgage loans. When
those loans worsened, it led to billions of dollars in reduction value and the firm’s first
quarterly loss in 2007 (The New York Times, n.d.) Bear Stearns’ write-down preceded
the subprime mortgage crisis, which refers to the sudden increase of subprime mortgage
defaults and is said to be a leading cause of the financial crisis. At the time, Bear Stearns
was a major player in capital markets and so their demise devastated the greater financial
market.
In a separate event six months later, the U.S. government placed the Federal
Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage
Association (Fannie Mae) into conservatorship (Jost, 2012.) The purpose of these two
entities was to increase American home ownership by investing in mortgages. As the
housing boom peaked in 2006, both Fannie Mae and Freddie Mac began engaging in
riskier investments such as subprime mortgage loans to further increase their profits. As
defaults on subprime mortgage loans increased in late 2007, so did the need for Fannie
and Freddie’s mortgage lending abilities. However, they were less able to perform in
these duties as they had collectively lost $30 billion dollars in risky investments (New
6
York Times, 2012.) In recognizing the importance of Fannie and Freddie’s lending
capabilities to national economic security, Congress nationalized the two entities,
effectively bailing them out in September 2008.
Weeks later, Lehman Brothers Inc., one of Wall Street’s largest investment firms
filed for bankruptcy. It too had suffered significant losses in the mortgage market and
experienced decline in investor revenue. Lehman Brothers’ demise caused global
financial panic, as its fiduciary presence had been ubiquitous in the larger market. As it
were to default on issued credits, anyone who had dealt with Lehman shares were now at
a loss as well. This included the nation’s major banks that in turn froze credit markets to
deter further losses. Within weeks of Lehman’s bankruptcy declaration, Treasury
Secretary Henry Paulson forces the nation’s largest banks to agree to bailout in order to
unfreeze markets and Congress subsequently passes the Emergency Economic
Stabilization Act.
The months that followed saw a barrage in institutional failings and white-collar
crime. It created the backdrop to which Wall Street Reform and Consumer Protection
Act, otherwise known as the Dodd-Frank Act, was introduced.
The Dodd-Frank Act
In terms of its legislative history, Barney Frank, a Democratic representative from
Massachusetts, initially introduced the Wall Street Reform and Consumer Protection Act
(H.R. 4173) in December 2, 2009. It was first referred to the House Committee on
Financial Services, in addition to the Committees on Agriculture, Energy and Commerce,
the Judiciary, Rules, Budget, Oversight and Government Reform and Ways and Means.
7
The House passed the bill on December 11, 2009. The Senate passed the Act on May 20,
2010 and was reported by the joint committee on June 29, 2010. The House agreed to the
Act on June 30, 2010. Weeks later, it was agreed to by the Senate on July 15, 2010.
President Barack Obama then signed the Dodd-Frank Wall Street Reform and Consumer
Protection Act into law on July 21, 2010.
The expressed purpose of the Dodd-Frank Act is “to promote the financial
stability of the United States.” It aims to achieve this by several ways. One way was to
create consumer protection agencies with authority and autonomy. Another way was to
put into place advanced warning systems. Lastly, the Act sought to promote transparency
of “exotic” financial instruments.
In regards to this last point, a main cause of the financial crisis is said to be
financial institutions’ over-reliance on complicated instruments that generated in
excessive risk speculation. Accordingly, the Dodd-Frank Act has sought to bring
transparency and accountability to the utilization of these obscure financial tools. The
law firm Morrison Foerster identifies these complicated financial devices to include
derivatives, proprietary trades, swaps, securitizations and futures.
Unlike preceding regulatory laws such as the Glass Steagall Act of 1933 or the
Federal Reserve Act of 1913, the structure of Dodd-Frank differs in that it does not
provide specific rules. Instead, it serves as a general guideline for various regulatory
institutions charged with creating the precise rules and statues to carry out its directives.
8
Problems and Concerns
The main concerns regarding the Dodd-Frank Act are found in this rule-making
stage of the law. For example, under the rule-recommending purview of the Financial
Stability Oversight Council and rule-making bodies of the Federal Reserve, Commodity
Futures Trading Commission (CFTC) and the FDIC, sits the much-contested Volcker
Rule. The Volcker Rule is a ban on propriety trading and is named after its originator,
former Chairman of the Federal Reserve Paul Volcker. Propriety trades (also known as
“prop trades” or PPTs) are trades made using a bank’s own money instead of customers’
money (Wikipedia, n.d.) While the FDIC often insures customers’ deposits, it does not
do so for PPTs thus making them riskier than trades that use customers’ money. In
addition, prop traders go for riskier investments than investments made from consumer
deposits. An example of these riskier investments would be a loan that included
subprime mortgages. While prop trades generate opportunities of great financial gain,
they are also said to have contributed to the excessive risk accumulation that caused the
financial crisis. The Volcker Rule seeks to remedy such excessive risk taking by banning
prop trades.
On one side of the Volcker Rule debate is U.S. regulators and consumer groups
that call for broader definitions of “prop trades” to protect against excessive risk-taking.
On the other side of the issue are certain financial and industry institutions promoting
more limited interpretations of “prop trades” in order to allow for risks they deem
necessary for economic viability. According to Ives (2012), the Volcker Rule could
mean a loss of billions of dollars in revenue for the big banks as they have depended on
prop trades’ high earning yields for years.
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As this paper is being written, both sides are lobbying governing agencies to
create the rule in terms favorable to their side. It is important to keep in mind that the
Volcker Rule is only one aspect of the Dodd-Frank Act being debated in the rule-making
stage. Among others are the Durbin Rule regarding bank interchange fees and limits on
finance futures. The effectiveness of political maneuvering and use of frames on behalf
of each side of the debate will play out in the coming months as we approach the
remaining rule-making deadlines of the Act.
Framing
Issues may viewed from many different perspectives and may elicit different
considerations and meanings of the issue (Chong & Druckman, 2007.) What results from
this notion is the concept of framing. Scheufele (1999) differentiates between two
concepts of framing—media frame and audience frame. This capstone will focus on
media frames or what Gamson & Modigliani (1987) refer to as the “central organizing
idea or story line that provides meaning to an unfolding strip of events...it suggests what
the controversy is about, the essence of the issue.”
More specifically, in terms of the news reporting, Entman (2003) suggests this
central organizing idea is created when reporters highlight some facet of the issue or
event and makes connections among them to promote an interpretation, evaluation or
solution of the issue. Entman (2003) posits that this highlighting of differing aspects on
an issue is helped along by terms that are culturally resonant and salient. This refers to
terms that have great influence among the general public and are understandable,
memorable and often times emotionally charged. For example, the use of the term
10
“financial crisis” may seem more noticeable to a larger number of members in the public
in an article because many people were affected by the crisis and recession.
While this capstone focuses on media frames the other type of frame
conceptualized by Scheufele bears mentioning as it leads to a more comprehensive
understanding of framing effects. Audience frames is referred to by Entman (1993) as
“the mentally stored cluster of ideas that guide individuals processing of information”
(pp. 53.) In their examination of the meaning and identification of framing and its effects
on the general public, Chong & Druckman (2007) similarly refer to framing as “the
process by which people develop a particular conceptualization of an issue or reorient
their thinking about an issue” (Chong & Druckman, 2007, pp. 104.) Framing in this
sense is described more as a psychological process as oppose to a media presentation or
layout of information.
Framing has traditionally been studied indiscriminately both ways leading to
Entman’s (1993) suggestion that the study of framing is disorganized. He proposed a
commitment to act as a field that synthesizes “scattered conceptualizations.” D’Angelo
(2002) disagrees with Entman’s (1993) call for a unified theory. He claims that a
multifaceted approach to framing has instead served the communications field well.
Namely, D’Angelo (2002) proposes that the “scattered conceptualizations” of framing
Entman (1993) refers to in his study provides “a conjectural base” that has the ability to
“turn apparent refutations into potentially promising leads for future research.” (pp. 883.)
Nevertheless, Entman (1993) proposes that a unified concept of frames would benefit
areas of the communications field such as content analyses. In this context, a common
11
theory of “framing would avoid treating all negative or positive terms or utterances as
equally salient and influential.” (Entman, 1993, pp 57.)
Frame Effects
Chong and Druckman (2007) refer to a hate group’s right to rally to illustrate the
effects of framing. When operating within a free speech frame, Chong and Druckman
(2007) found that individuals were more willing to consider allowing the hate group to
rally. However, if those individuals operated within a public safety or religious tolerance
frame, the individuals would be more likely to consider those in their decision as well and
may be less willing to allow the hate group to rally.
It would seem then that framing has a great impact on individuals’ opinion
formation regarding issues. Indeed, Nisbet (2009) notes that there is evidence that the
principles of framing are recognized for their effect and already being used by various
organizations and industries. Namely, there is a “growing recognition that
communication is not simply a translation of facts—it is a negotiation of meaning”
(Nisbet 2009 pp. 41.) Framing contributes to this negotiation of meaning.
Of course, while we cannot underestimate the power of frames we must be careful
to overestimate them as well. If frame effects were that simple, agreement on DoddFrank rule decisions would become unanimous as soon as an article written in a unified
tone would be presented. Scheufele (2000) specifically identifies key variables in the
effects of framing. These include demographic considerations, information processing
strategies of individuals and obtrusiveness of other issues or qualities or audiences’ “pre-
12
exposure orientations.” Moderators refer to mediating processes that influence framing
effects and are similar to Scheufele (2000)’s aforementioned framing variables.
Borah (2011) found that the most common moderator used in the past decade of
framing literature is “political knowledge.” In terms of this capstone, an “obtrusive
quality of audiences” or moderator may include political knowledge. That is to ask,
whether the audience consider an idea regarding the act differently if it had come from a
politician they disagree with?
Borah (2011) analyzed how much of the framing literature from the past decade
incorporated moderators such as political knowledge and found more research can be
done on this subject. Borah (2011) notes, as did Chong and Druckman (2007), that the
influence of any knowledge as a moderator in framing is conflicted.
Frame Producers
In her analysis of framing literature in the past decade, Borah (2011) also
examined how much focus was placed on frame production. Frame production refers to
the study of social actors such as politicians and news content producers who create
media frames (Borah, 2011). Entman (2003) found evidence of frame producers in his
explanation of how interpretive frames activate and spread from top of a stratified
system. In relation to this context, this capstone posits source representation in articles
serve as frame producers in that they form and help promote frames. For example, if
bankers were to be found the most often referred to in articles, it would seem that they
control the conversation on the Dodd-Frank Act. They may be more able to shape public
discourse on what is effective or not effective about certain Dodd-Frank rules regardless
13
of whether or not these determinations serve the interest of the public at large. As
Entman (2003) suggested, since journalists have the ability to hinder or advance the
spread or activation of frames, it would be important to examine media’s reporting of
issues such as the Dodd-Frank Act, which are subject to public comment and
interpretation.
The effect of frame producers on messaging remains inconclusive. While it is
true frame producers create frames, whether or not the intended audience accept the
frames remain to be seen. Borah (2011) found that there was indeed a lack of framing
literature that concentrated on frame production despite the fact that “the study of frame
production is pertinent for a comprehensive understanding of framing theory” (pp. 256.)
Frame Competition
In regard to framing effects, Price, Tewksbury, and Powers (1995) described a
linear, “hydraulic” pattern of thoughts. In this pattern they describe one set of thoughts,
triggered by a particular frame pushing aside thoughts that do not belong to the set of
triggered thoughts.
Similarly, Simon & Xenos (2000) describe a process in which competing frames
come into (and fall out of) dominance through public deliberation. Simon & Xenos
(2000) has found some confirmation that, “claims are bought in the discussion,
considered, and cease to appear as they are resolved.” (pp.369.) This capstone suggest
the presence of frames which are presented by the media with which to consider the
Dodd-Frank Act. Following this idea of a successive frame consideration, when a certain
set of values influence an individual’s evaluation of an issue, that criterion is said to be
14
that individual’s “frame in thought” (Chong & Druckman, 2007, pp. 105.) This capstone
posits the existence of three possible frames that may be present in audience’s thoughts
while considering the Dodd-Frank Act and its proposed rules. They are the political,
economic reform and economic viability frames.
The existence of frame competition is important to consider given framing’s
effects on the public’s conceptualizations of issues. More specifically in how these
public conceptualizations are formed from what Gerhards & Rucht (1992) would refer to
the diagnostic and prognostic categories of framing.
In terms of this capstone, diagnostic framing would consider whether it was acts
of financial misconduct or generalized deregulation that articles blamed as the cause of
the financial crisis. Prognostic framing of the Dodd-Frank Act in this case focuses on
what needs to be done about the issue. For example, whether tight regulation is seen as a
hindrance or necessity for America’s economic recovery.
These categories of framing speak to the functions of framing suggested by
Entman (2003.) These functions include defining the problem, identifying its cause,
conveying a moral judgment on the issue and endorsing a remedy for the problem
(Entman, 2003.) It follows then that framing considerations are important in the
understanding of the Dodd-Frank Act in its many rule-making debates. Therefore, this
capstone investigates:
RQ1: How was the Dodd-Frank Act framed?
15
Framing and journalism
As a law enacted by Congress, it would make sense to assume the occurrence of a
political frame in the reporting of the Dodd-Frank Act. Vreese et al.’s (2001)
examination of political framing suggests that media outlets were more likely to
emphasize conflict in reporting general political and economic news. However, Vreese et
al. (2001) founds that coverage of the Euro launch (in most of the countries examined)
emphasized the consequences of the conflict.
While it is important to note the analysis was done regarding news content in
European countries and not the U.S. and regards television news media as opposed to
print media, this paper may speak to why conflict frames are used in some instances of
economic news and not in others. For example, the scholars posit that the conflict frame
was less dominant in euro stories for two main reasons. For one, the 1999 introduction of
the Euro was relatively a success in that it caused no market panics or crises to report at
the time Vreese et al. (2001.) Second, conflict regarding the issue had been played out
years before and now it was an issue of implementation that resulted from long-term
planning Vreese et al. (2001.) Vreese et al. (2001) suggest this led to the focus on how
people were economically affected by the launch in strict financial terms and figures. On
this note, it is possible that in the U.S. that if the Dodd-Frank Act’s directives were
straightforward, we may see less focus on conflict surrounding the Act and more
information about how the new law will affect the U.S. economy and American people.
16
Problems in political and business journalism
For better or worse, the Dodd-Frank Act’s directives regarding rule-making leave
room for debate regarding their interpretation. Included in this interpretation debate are
regulators, the industries that affect the rules and the media.
McChesney (2003) note several flaws in the journalism industry that may inform
considerations found in this capstone. For one, he posits that journalism avoids placing
news in its greater ideological contexts to make sense of issues for fear of appearing
biased towards a particular side McChesney (2003.) The result of this, he argues, is that
important social issues will receive less explanation or coverage until attached to a
newsworthy event such as a protest or riot McChesney (2003.) McChesney (2003)
argues that this flaw causes journalists to not as effectively report on issues. By placing
focus on more sensational events, reporters miss the critical yet non-urgent aspects of
issues McChesney (2003.)
This reporting flaw may be present in the Dodd-Frank Act. For example, while
an article focuses on particularly heated regulation rule argument between politicians,
stories about financial industry lobbyists effectively arguing for less stringent rules
behind closed doors may go unnoticed. Under McChesney’s (2003) supposition, the
article may disregard contextualizing the particular debate within the larger financial
crisis in favor of focusing on the more newsworthy political argument.
McChesney (2003) goes on to argue U.S. journalisms’ pro-corporate bias. He
argues that government malfeasance will receive more scrutiny by the current media than
corporate wrongdoing. While this argument seems dated in light of the scandals the
recent years, it would be interesting to see whether the coverage surrounding the Dodd-
17
Frank Act will focus on a lack of government oversight or misconduct on behalf of
financial institutions. Silk (1972) warns against a “deliberate bending” of the
presentation of truth to the media by these entities. This may refer to at best, the “spin”
of situations. At worst, it refers outright manipulation of the facts or deception.
The media however, is not a passive outlet for information. Nor are all news
outlets the same. In her content analysis of financial news reporting on the 1987 stock
market crash, Daszko (1989) found that while specialized news such as Business Week
was responsible and comprehensive the general business press such as The New York
Times and Time was less so. Daszko suggests business and economic presses’ readership
demands balanced presentation of facts and expert analyses. Specialized news’ audiences
are made up industry professionals and general business audiences are made up of a
wider demographic of people that are not necessarily concerned with financial nuances.
Therefore the general business press may be more concerned with readership and may
focus less dry facts and figures of stories. They may focus more on human-interest
aspects of such stories such as the people involved or conflict of the debate.
Hollifield (1997) suggests this may not be a bad thing. While specialized news
may focus on numbers, she suggests the general business press is more likely to cover the
social implications of such policies (Hollifield 1997.)
Financial literacy
Understanding the social implications of certain policies would arguably require a
working knowledge of the terms involved in those policies. According to Williams
(2007), proponents promote financial literacy as a form consumer empowerment. The
18
idea is that the more people understand financial jargon, the more they will be able to
make good financial decisions in their personal lives. The idea of financial literacy as a
form of consumer empowerment is implemented through various local, state and federal
programs in the U.S. Braunstein and Welch (2002.) Braunstein and Welch (2002)
identified numerous sources of financial literacy training: employers, state cooperative
extension services, community colleges, faith-based groups, community organizations
and commercial banks. They also proposed pre-crisis factors that drive financial literacy
include technological changes, market innovation, the rise of questionable lending
practices, and increase in consumer responsibilities (Braunstein & Welch, 2002.)
Interestingly enough, Braunstein and Welch (2002) find that while financial literacy
programs have proliferated, standards measuring the effectiveness of such programs have
not kept pace. The findings of effectiveness financial literacy that are available are
mixed (Braunstein & Welch, 2002.) Williams (2007) also questions the use of financial
literacy education as policy.
Regardless of its true effectiveness, financial literacy continues to be a principle
of economic reform. Indeed, one of the objectives of the newly created Consumer
Financial Protection Bureau (CFBP) under Dodd-Frank Act is to “educate” consumers.
If financial literacy leads to greater personal financial understanding, it would follow that
it makes people better able to argue in financial policy debates as well. As the economic
crisis had affected many Americans, it would stand to reason that that Americans expect
the Dodd-Frank Act, as their government’s response to the crisis, to be successful in
assisting the recovering economy. In order to effectively evaluate the merit of the Act
19
however, people will arguably need a working knowledge of the issues involved in the
Act.
Braunstein and Welch (2002) found that the mass media (TV, radio, magazines
and newspapers) was cited as the most effective way to learn about finances. To this end,
this capstone investigates:
RQ2: To what degree was the act explained in the coverage?
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METHOD AND PROCEDURE
In order to study the proposed research questions, I conducted a content analysis
on articles that appeared in the New York Times newspaper from July 2010 to December
2011 with the terms “Dodd Frank Act,” “Dodd-Frank Act” or “Wall Street Reform and
Consumer Protection Act.” This time frame allows for the investigations of “the first
impressions” of the Dodd-Frank Act in print media from the time the Act was signed into
law to a year and half into the Act’s rule making deadlines.
The New York Times is highly influential in print media. It arguably serves as
the general template for other large national newspapers in regards to news layout format
and content coverage. Also, while the New York Times is circulated mainly in the
greater New York region, they are also heavily circulated nationwide. Additionally, The
New York Times not only has wide national influence but if often read internationally as
well.
Articles were retrieved from the LexisNexis Academic database with the terms
“Dodd Frank Act,” “Dodd-Frank Act” or “Wall Street Reform and Consumer Protection
Act” within the New York Times section. Article that appeared in print publication were
included and blog article results were excluded. This method resulted in a total of 151
articles. The sample set was edited for irrelevant or duplicated articles. Even-numbered
articles were coded, for a total number of 56 articles in the final data set.
Frames
The recency of the financial crisis and passage of the Dodd-Frank Act have not
allowed for many in-depth examinations on the frames that surround the issue. In the
21
course of my research, I was not able to find established category systems that were
applicable to this capstones’s examination and therefore had to create my own. I describe
the following frames and describe their potential presence in articles.
Political Frame
For the purpose of this study, when certain political considerations appear in an
article, they serve as indications that a political frame is present. These considerations
include references to politicians of any political parties or statements about the political
strategy behind its passage. Additionally, they include the constitutionality of the Act or
issues of government “overreach” in terms of implementing the act.
Economic Reform Frame
Evidence of an economic reform frame includes among other things, references to
the financial crisis. Bringing to mind the financial crisis contextualizes the Dodd-Frank
Act as a reform tool with which to fix a broken economy and therefore highlights aspects
of the Act accordingly. Indicators of this frame may also include statements about the
inefficiencies of current regulations or best market practices that may be implemented in
the future. Indicators may also include human-interest pieces of citizens in the current
housing or job market. Lastly, indicators of this frame may include profiles of financial
industry leaders under investigation for financial misconduct.
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Economic Viability Frame
The economic viability frame refers to contexts that highlight the Dodd-Frank
Act’s effect on the U.S.’ economic competitiveness. These highlights may include
profiles of national and international industry experts or businesses and statements
regarding effective market practices of other countries. More specifically, this paper
focuses on the Act’s effect on the success of the U.S. economy, U.S. banks (such as
Wells Fargo and JP Morgan Chase), and U.S.-based companies when compared to their
international counterparts. Indicators of this frame may further include statements
regarding advantages or disadvantages gained by these entities as a result of the Act.
Source Representation
In order to fully capture how the Dodd-Frank Act was framed in the initial days of
its passage, this capstone also looks at which groups are often referred to in the articles.
Source representation in this case may help determine who the “frame producers” are and
to what extent certain groups are viewed as most knowledgeable in the discussion of the
Dodd-Frank Act. For the purpose of this study, this capstone investigates how often
financial industry representatives, economists, consumer advocacy groups and politicians
are mentioned in the sample. In the case of politicians, this capstone further examines
how often Democrats, Republicans and other third parties are referred to in the articles.
Explanation of Terms and the Act itself
To analyze to what degree the Dodd-Frank Act was explained in the coverage,
this capstone examines how often articles described the Act, its individual rules and
23
financial terms associated with the Act. Namely, whether articles attempt a brief
description or merely state the name “Dodd-Frank Act” or individual terms in discussion
of the Act’s ramifications.
It is a goal of the Dodd-Frank Act to bring transparency and accountability to
“exotic” financial instruments. An understanding of the Act necessitates a working
knowledge of certain financial jargon that arguably, most Americans have no need for
and therefore do not have. These include such terms as “swaps”, “derivatives” and
“proprietary trades.” In thorough reporting of the Dodd-Frank Act, these jargon terms
should be explained. This capstone compares articles’ descriptions of the Act and
financial terms with those found in the online financial dictionary, Investopedia.
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RESULTS
From July 1, 2010, to December 1, 2011, there were a total of 151 articles in the
New York Times print publication that included the terms “Dodd Frank Act,” “DoddFrank Act” or the “Wall Street Reform and Consumer Protection Act.” Of these, I coded
56 even-numbered articles.
Frames
An article may have multiple frames and they may appear in any number of
combinations with one another. The first research question reads:
R1: How was the Dodd-Frank Act framed?
Political Frame
For the purpose of this study, the occurrences of certain political considerations
within articles mark the presence of a political frame. These considerations are listed in
Table 1.
Table 1: Presence of Political Frame
Statements
Bipartisan effort of Dodd-Frank
General bipartisan effort
Political disagreement
Politician v. Non-Politicians
Politicians
% Of articles that discuss
3.6
8.9
26.8
23.2
57.1
N=56
A political frame was present in the article if it included statements regarding the
political bipartisan effort that occurred in the development of the Dodd-Frank Act,
25
general bipartisan efforts, political disagreement, disagreement between politicians and
non-politician groups and discussed politicians in general. Of these indicators, the most
frequently occurring is the discussion of politicians, which appear in 57.1% of the 56
articles, followed by statements regarding political disagreement about the Dodd-Frank
Act, which appear in 26.8% of the articles. Political disagreement includes statements of
politicians arguing with others in their own party or those outside of their party.
Statements regarding bipartisan efforts in the realization of the Dodd-Frank Act seem to
occur the least often, appearing only in 3.6% of the articles discussed.
Economic Reform Frame
An economic reform frame focuses on the restructuring aspects of the DoddFrank Act as it relates to the American economy. Indicators of this frame are listed in
Table 2:
Table 2: Presence of Economic Reform Frame
Statements
Financial Crisis
(+) Housing market
(-) Housing market
(+) Job market
(-) Job market
% Of articles that Discuss
67.9
3.6
3.6
3.6
5.4
N=56
For the purpose of this study, articles that discuss the financial crisis, the housing
market or employment suggest the presence of an economic reform frame in the reporting
of the Dodd-Frank Act. The Dodd-Frank Act was created in response to the recent
financial crisis and so it would follow that a majority of the articles (67.9%) would
reference the crisis in reporting the Act. The housing market and employment rates were
26
heavily impacted during the crisis but were discussed less in the articles. Though
occurring infrequently (5.4%) articles that discussed the Dodd-Frank Act within this
sample were more likely to reference the Act’s negative impact on employment than
positive impact in the job market or any impact in the housing market (all of which were
discussed in only 3.6% of the articles.)
Economic Viability Frame
An economic viability frame refers to the discussion of the Dodd-Frank Act in
terms of economic competitiveness. These include statements regarding the Dodd Frank
Acts impact on the following:
Table 3: Presence of Economic Viability Frame
Statements of Impact on
% of (+) statements
U.S. market
19.6
U.S. bank
7
U.S.-based company
4
Total
27
Total % of Articles with
Presence of Economic
Viability
% of (-) statements
16
32
8
43
48%
N=56
Of the 56 articles coded for this project, nearly half (48%) included a statement
regarding the Dodd-Frank Act’s impact on the economic competitiveness of the U.S.
market, U.S. banks and U.S.-based companies against their foreign counterparts. Of the
27 articles that discuss the economic viability of any of these three areas, 90% (24
articles) had a negative valence and 21% of the articles included both positive and
27
negative valence. It was unusual to have only potential positive economic viability
impacts of the Dodd-Frank Act mentioned in the articles.
Source Representation
Source representation refers to the discussion of or reference to a particular group
in the Dodd-Frank Act debate. The percentage of articles that mention the following are
as follows:
Table 4: Source Representation
Politician
% Of articles
that Mention
57.1
Financial
Industry
Economist
60.7
10.7
Consumer
Advocacy
Group
16.1
Source representation refers to the discussion of or reference to a particular group
in the Dodd-Frank Act debate. For the purpose of this capstone, it is suggested that those
involved in the Dodd Frank debate tend to fall into one of four main categories:
politician, financial industry, economist or consumer advocacy group. Of these groups,
sources that represent the financial industry (non-bank and bank financial institutions,
Wall Street firms and their lobbyists) were mentioned or quoted most often (60.7%)
followed by politicians (57.1%), consumer advocacy groups (16.1%) and economists
(10.7%.)
News Coverage
The results for the occurrence and explanation of terms found in the articles are in
Table 5.
28
Table 5: The Explanation of Terms in Dodd-Frank Act
% of articles that Mention
Term
Derivatives
30.4
Proprietary Trades /
8.9
Trading
Swap
14.3
Swap dealer
5.4
Security-based swap
5.4
Futures
10.7
Toxic Assets
5.4
Securities
33.9
Hedge
37.5
Market-making
5.4
% of articles that Explain
3.6
5.4
0
0
0
0
0
0
0
0
In regards to the Dodd-Frank Act itself, 22 of the 56 articles (39.2%) provide a
general description of the Act and 45 of the 56 articles (80.4%) describe at least one
aspect of the Act (i.e. the Volcker Rule, the Durbin Amendment, etc.) Among the terms
associated with the Act, “hedge” or “hedging” (37.5%), “securities” (33.9%) and
“derivatives” (30.4%) were the most mentioned. Only the terms “derivatives” and
“proprietary trades/trading” were explained in the articles and even in those instances,
attempts at explanations were rare (3.6% and 5.4%, respectively.)
29
DISCUSSION
In order to address the first research question, I examined the potential presence
of three frames: political, economic reform and economic viability. The first research
question reads:
R1: How was the Dodd-Frank Act framed?
I found indictors of each of the three frames in the coded articles. It became
apparent, however, that some frames were more prevalent than others. More specifically,
among considerations found in the political frame, the presence of political disagreement
(among members of the same or differing parties) in Dodd-Frank Act articles were more
prevalent than the indicator of politicians’ disagreement with non-politician groups. This
is not to say political disagreement occurs more frequently than this other type, more so
that within the articles, political disagreement was featured slightly more often.
In terms of the economic reform act, statements regarding the financial crisis
occurred frequently in a majority of the articles as the Dodd-Frank Act was created in
response to the recession caused by the crisis. It was surprising to note however that the
housing market was rarely mentioned in this initial period of the Act as the proliferation
of subprime mortgages (and the subsequent deterioration they caused) in the financial
market system preceded many of events of the crisis. Indeed, the placement of Freddie
Mac and Fannie Mae into government conservatorship was a crisis earmark of 2008.
Furthermore, the housing market and employment rate arguably hold more relevance to
the general public than “exotic financial instruments.” It should follow that in regards to
reporting on the Dodd-Frank Act, journalists would report more (or at least equally) on
30
how the Act affects these aspects of citizen life more than on the abstract financial
instruments. However, this capstone has found that within the initial days of the Act’s
passage, this was not the case.
Among articles that mention the Dodd-Frank Act’s positive impact on jobs, it was
often noted that this meant an increase of employment in the areas of financial law (as
more attorneys will be required in order to ensure proper compliance with the new rules
created from the Act.) The Act’s positive impact on other industries was noticeably
absent from article discussions despite the fact the crisis was widely felt in a majority of
other job sectors.
With regard to the economic viability, it was interesting to note the dominance of
a negative valence within this frame. Namely, articles were more likely to say that the
Dodd-Frank Act has or potentially may have a negative impact on the economic viability
of U.S. banks or U.S.-base companies. It should be noted that statements regarding
negative impact did not necessarily compare these U.S. areas to their foreign
counterparts. Rather, the statements more often claimed the Dodd-Frank Act was a
general hindrance to economic viability in these sectors.
A second purpose of this capstone is to examine the print media coverage of the
Dodd-Frank Act and whether terms associated with the Act were explained. The second
research question reads:
R2: To what degree was the act explained in the coverage?
Explanation of the act as it relates to this question refers not only to a description
of the Act itself or its individual components but also to explanation of financial industry
31
terms associated with the Act. For example, according to a Senate brief summarizing the
Dodd Frank Act, a legislative highlight of the Act includes “providing transparency and
accountability to exotic financial instruments.” Upon further examination of the Act, one
comes across terms such as “derivatives,” “swaps” and “proprietary trades.”
It should follow then that discussion of the Act would at some point include these
terms, as working knowledge of these terms may be needed in order to properly debate
the issue of the Act. Of terms chosen for this study, “proprietary trades or trading” was
explained the most often.
This finding is fitting given that the issue of proprietary trades (their accurate
definition and possible consequences in certain industry’s bottom line) is highly
controversial. As the deadline to create the details of this rule (otherwise known as the
Volcker Rule as mentioned earlier in the paper) draws near, I suspect its mention rate in
news articles to increase.
However, I am less certain in positing an increase in its explanation rate. As we
see in Table 5, very few key terms in the Dodd-Frank Act are mentioned, much less
explained. Take for example, the term “derivative.” Though this term is mentioned in
around 30% of the articles, only 3.6% of the articles attempt a brief definition of the term.
Furthermore, within those few instances of explanation, derivatives were only generally
described as “complex financial instruments.” And so in regards to the financial jargon
required to properly debate merits of the Dodd-Frank Act, there was little to no
explanatory journalism to be found.
This is not to say that I believe that a lack of explanation of the terms of the Act
or the Act itself is deceptive or negligent on behalf of the reporters. Sometimes a
32
newspaper will provide one in-depth report and explanation of terms and find that as a
sufficient complement to articles that readers may refer to from that point moving
forward. Furthermore, it may not be necessary for the public to be aware of the minutia
of the rule-making processes or terms mandated by the Act. People have their own lives
to live after all.
Yet despite this notion, it is important to note that financial regulatory reforms not
only affect the financial institutions and financial industry themselves but also the larger
general tax-paying population and greater economy. The 2008 financial crisis was
“bailed out” by taxpayers’ money and greatly affected American’s mortgages though by
and large citizens themselves had nothing to do with the decisions created that brought on
the crisis. The general public then, as taxpayers, has a right to be included in the
regulatory reform debate and should have the chance to be properly informed of issue at
hand.
Source Representation
In an effort to investigate which source groups the most often referred regarding
the Dodd-Frank Act I proposed four categories in which to discuss players of the debate:
politicians, the financial industry, economists and consumer advocacy groups. Upon
conducting my analysis I found that many regulators were often referred to as well. For
example, one article featured a profile of C.F.T.C. chairman Gary Gensler. Regulators
are alike other groups examined for this study in that they are intimately involved in the
rule making process of the Dodd-Frank Act. Notably, difference in opinion regarding the
rules may also be found within the group. One of the articles in the sample for instance,
33
refer to a disagreement between the Federal Deposit Insurance Corporation (FDIC) and
the Office of the Comptroller of the Currency regarding the details of the Volcker Rule
(Article N8.)
Of all the groups, the financial industry was the most often occurring source
within the articles (60.7%.) I do believe this overrepresentation of Wall Street as sources
speaking about the Dodd-Frank Act has potential consequences. First, by appearing as
consistent sources of information of the Dodd-Frank Act it would seem that Wall Street
representatives control the narrative on the Act and has more expertise on the issue. This
may be the case in certain areas, however, the potential effects of the Act is highly
debatable and subject to interpretation. Take the example of transparency rules: while
Wall Street would claim transparency rules inhibit profitable trade thus hinder the
market, regulatory advocates would claim the rules will prevent deceptive fiduciary
practices and therefore will encourage market prosperity.
Consequently, if Wall Street overrepresentation creates the appearance of more
expertise on the Dodd-Frank Act debate, Wall Street may gain a better positioning with
agencies charged with creating and implementing the specific rules of the act. In turn,
regulators or consumer advocates who may better represent citizen’s interests may less
influence these rule-making agencies on the matter. What is more disconcerting is the
finding that economists, often considered bipartisan experts on this issue, are ignored in
favor of politicians and the financial industry.
34
Limitations
While this paper seeks to effectively add to the growing knowledge of the media
framing of financial regulations, there are several limitations to its findings. For one, the
sample size of the article is relatively small. While the purpose of this paper was to
capture the “first impressions” of the Dodd-Frank Act, incorporating other news media
outlets may have affected the results of this study. Other newspapers or news media
formats (such as television or social media) may have resulted in different findings but to
examine these were beyond the scope of this paper.
It is also important to note is the oversimplification of my category systems. For
example, in examining “U.S. banks”, I did not differentiate between small and large
banking institutions. This is key in that proposed rules of the Dodd-Frank Act do not
have the same affect for different-sized banks. For instance, small banks are exempt
from certain regulations because they have proven to be too burdensome for small banks’
survival, to say nothing of their profitability.
Furthermore, the data collected for this project relies solely on one coder. In
order to determine a truly reliable coding sheet, more coders would have to be included
and trained to examine the articles. Inter-coder reliability of the codebook would then
need to be established. Lastly, to further determine validity of the frames presented in
this capstone, a wider time frame would be required.
Future Study
In keeping these limitations in mind, I suggest one area of future study regarding
this subject would be to expand the sources of data to include newspapers such as the
35
Washington Post, USA Today or the LA Times. On this note, different news mediums
may be incorporated as well. For example, it would be helpful to consider whether
television reporting of the Dodd Frank Act is similar in content coverage as newspapers
reports. It would also be interesting to note whether different mediums do a better job of
explaining terms of the Act and the Act itself.
Yet another avenue of study may incorporate financial regulators in examining
source representation. It could be argued that the public has certain stereotypes for
politicians, consumer advocates, economists and Wall Street, however the same cannot
be said for regulators. For example, one may study the effects regulators’ profiles have
on the fairness perception of a particular rule.
More of personal interest to me however, would be how the presence of certain
frames affects the amount of explanation of the substantive aspects of the Dodd Frank
Act. Namely, whether certain frames promote or hinder explanations required for
understanding the consequences of the Act.
Take for instance the political frame. Arguably, focus within this frame falls on
the players of the debate and the proceedings of the debate and less about how the Act
will affect the public and general economy. Therefore, it may be reasonable to suspect
that we will see less explanation of the industry terms in these articles because it is
assumed understanding of the issue is prioritized less than debate proceedings and the
frame producers.
On this note I would also suggest “economic viability” evokes a “competition”
frame. Competitions are argumentative and the merits of each side subject to debate and
so I posit that describing the Act in terms of economic viability may also cause reporters
36
to focus more on the actors and progress of the debate rather than promote understanding
of the Act.
Implications of this Project
The issue of financial regulation is complex and burdensome to many average
citizens. The terms of the debate and implications of certain policies are fraught with
industry jargon. It is therefore understandable that political participation and engagement
in the Dodd-Frank Act rule-making debates in part of average citizens is less common
than in other national issues.
Take for example, the current widespread attention on the Trayvon Martin case.
Trayvon Martin was a Florida teenager that was shot by a neighborhood watchman
claiming self-defense under Florida’s 2005 Stand Your Ground Law. In addition to
having a more personal resonance to the public, an examination of the communicative
frames used in the reporting of this issue would be simpler. It would not require an
explanation of jargon. The immediate situation surrounding the issue is clear and actors
involved are easier to identify, as their names are not tied to obtuse professional titles.
These reporting circumstances—human interest and easy comprehension of the
situation—better lends itself to public engagement than the issue of the Dodd-Frank Act.
As unfair as it may seem, this not necessarily an excuse for public disengagement
on the issue of financial reform. The financial crisis is being resolved with taxpayer
money and therefore taxpayers have essentially become shareholders of the financial
institution and stakeholders in the situation.
37
This capstone seeks to further understanding on how the complex issue of the
Dodd-Frank Act and the intricacies of the situation and players of the Act are reported to
this tax-paying public. Effective public engagement requires the presentation of thorough
information to the public on behalf of the media. While I believe responsibility of civic
engagement falls to citizens, I wanted to explore how effectively the media is fulfilling
their duties in informing the American citizenry.
The findings of this study endeavors to add to the greater literature regarding how
seemingly esoteric financial issues are reported to a public it effects. The results imply
that there may be a natural journalistic tendency to increase general relevance of a
convoluted issue by focusing on the actors and proceedings of the debate instead of the
substantive complex issue itself. This may further decrease public understanding of
complex issues and therefore inhibit their inclination to get involved and properly engage
decision-makers with their positions.
Today’s era of technology and 24-hour news coverage has allowed for
unprecedented information dissemination. Additionally, social media has allowed for
the inclusion of more people in civic participation more so than in any other time in the
world’s history. Issue advocates would be remiss in not examining how reporting content
and content presentation inhibits public understanding in the presence of advanced
technology media, especially in regard to intricate issues such as financial regulatory
reform. A lack of proper information presentation and explanatory journalism may cause
communicators to be complacent. Communications may then regress to its earliest
theory of the “magic bullet” in which prolific message dissemination is considered
enough for public acceptance and understanding of important and complex issues.
38
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42
CODE BOOK
Coders, please read the full article first, then answer each question.
1. Is a statement made:
a.
b.
c.
d.
e.
To describe the Dodd-Frank Act as a whole?
To describe at least one aspect of the Act?
About the purpose of the Act?
Explicitly stating the Act will succeed in its objectives?
Explicitly stating the Act will fail in its objectives?
Yes 1[ ]
Yes 1[ ]
Yes 1[ ]
Yes 1[ ]
Yes 1[ ]
No 2[ ]
No 2[ ]
No 2[ ]
No 2[ ]
No 2[ ]
2. Are any of the following referred to or mentioned in the article?
a.
b.
c.
d.
Politician
Financial industry representative
Economist
Consumer advocacy group
Yes 1[ ]
Yes 1[ ]
Yes 1[ ]
Yes 1[ ]
No 2[ ]
No 2[ ]
No 2[ ]
No 2[ ]
3. Is a statement made regarding the financial crisis or recession (2007-2010)?
Yes 1[ ] No 2[ ]
4. Does the article include a statement that Dodd-Frank could:
a. positively affect housing?
b. negatively affect housing?
c. positively affect the job market?
d. negatively affect the job market?
Yes 1[ ]
Yes 1[ ]
Yes 1[ ]
Yes 1[ ]
No 2[ ]
No 2[ ]
No 2[ ]
No 2[ ]
5. Is a statement made regarding Dodd-Frank’s (or its individual part’s) potential positive
impact on the viability of any of the following:
a. U.S. market?
b. U.S. banks?
c. U.S.-based companies?
Yes 1[ ] No 2[ ]
Yes 1[ ] No 2[ ]
Yes 1[ ] No 2[ ]
6. Is a statement made regarding Dodd-Frank’s (or its individual part’s) potential
negative impact on the viability of any of the following:
a. U.S. market?
b. U.S. banks?
c. U.S.-based companies?
Yes 1[ ] No 2[ ]
Yes 1[ ] No 2[ ]
Yes 1[ ] No 2[ ]
7.Is a statement made regarding the political aspects of the Dodd-Frank Act? This may
include the Act’s constitutionality, state’s rights, etc.
Yes 1[ ] No 2[ ]
43
8.Does the article mention or quote politicians from any of the following parties:
Democrat
1[
] Republican
2[
] Third Party 3[ ] Does not mention politicians 4[ ]
9.Is a statement made regarding:
a. Political bipartisan effort in creating the Dodd-Frank Act?
Yes 1[ ] No 2[ ]
b. Political bipartisan efforts on any other issue?
Yes 1[ ] No 2[ ]
c. Political disagreement about the cause or impact of the Act? Yes 1[ ] No 2[ ]
d. Disagreement between a politician and economist about the cause or impact of the
Act?
Yes 1[ ] No 2[ ]
e. Disagreement between a politician and consumer advocate groups about the cause or
impact of the Act?
Yes 1[ ] No 2[ ]
f. Disagreement between a politician and the financial sector about the cause or impact
of the Act?
Yes 1[ ] No 2[ ]
g. Disagreement among economists about the cause or impact of the Act?
Yes 1[ ] No 2[ ]
10. Check which terms appear. The term only needs to appear (verbatim.) Do not
include terms when it appears within a title of a law or a group (ex: Securities and
Exchange Commission.)
Not mentioned1
Mentioned2
Mentioned3
Explained
a. Derivatives
b. Proprietary
Trades/Trading
c. Swap(s)
d. Swap dealer
e. Security-based swap
f. Future(s)
g. Toxic asset(s)
h. Securities
i. Hedge
j. Market-making
44
INVESTOPEDIA DEFINITIONS
The following definitions have been obtained from Investopedia
(http://www.investopedia.com/#axzz1tG5YrsQA)
Dodd-Frank Financial Regulatory Reform Act: A piece of legislation that increased
government oversight of trading in complex financial instruments such as derivatives.
The Dodd-Frank Financial Regulatory Reform Bill was named after Senator Christopher
J. Dodd and U.S. Representative Barney Frank. It restricts the types of proprietary trading
activities that financial institutions will be allowed to practice. The Dodd-Frank Financial
Regulatory Reform Bill was passed with the intent of preventing the collapse of major
financial institutions such as Lehman Brothers from happening again.
Following the 2008 near-collapse of the U.S. economy, which was fueled by the
crash of the housing bubble, the Dodd-Frank Financial Regulatory Reform Bill
established restrictive measures in an attempt to prevent such events in the future. In
order to protect unsuspecting borrowers against abusive lending and mortgage practices,
the reform bill established government agencies to monitor banking practices and
oversight of troubled financial institutions.
Derivative: A security whose price is dependent upon or derived from one or more
underlying assets. The derivative itself is merely a contract between two or more parties.
Its value is determined by fluctuations in the underlying asset. The most common
underlying assets include stocks, bonds, commodities, currencies, interest rates and
market indexes. Most derivatives are characterized by high leverage.
Proprietary Trading: When a firm trades for direct gain instead of commission dollars.
Essentially, the firm has decided to profit from the market rather than from commissions
from processing trades.
Swap: Traditionally, the exchange of one security for another to change the maturity
(bonds), quality of issues (stocks or bonds), or because investment objectives have
changed. Recently, swaps have grown to include currency swaps and interest rate swaps.
Swap dealer: An individual who acts as the counterparty in a swap agreement for a fee
called a spread. Swap dealers are the market makers for the swap market. The spread
represents the difference between the wholesale price for trades and the retail price.
Because swap arrangements aren't actively traded, swap dealers allow brokers to
standardize swap contracts to some extent.
Security-based Swap: A swap based on an instrument representing ownership (stocks),
a debt agreement (bonds) or the rights to ownership (derivatives).
Historically, swaps have been traded in the over-the-counter market, mainly
between firms and financial institutions, in largely unregulated transactions. In 2011, the
SEC proposed requiring security-based swap dealers and participants to register with the
commission, as part of the Dodd-Frank Wall Street Reform and Consumer Protection
Act.
45
Future: A financial contract obligating the buyer to purchase an asset (or the seller to
sell an asset), such as a physical commodity or a financial instrument, at a
predetermined future date and price. Futures contracts detail the quality and quantity of
the underlying asset; they are standardized to facilitate trading on a futures exchange.
Some futures contracts may call for physical delivery of the asset, while others are settled
in cash. The futures markets are characterized by the ability to use very high leverage
relative to stock markets.
Futures can be used either to hedge or to speculate on the price movement of the
underlying asset. For example, a producer of corn could use futures to lock in a certain
price and reduce risk (hedge). On the other hand, anybody could speculate on the price
movement of corn by going long or short using futures.
Toxic Asset: An asset that becomes illiquid when its secondary market disappears.
Toxic assets cannot be sold, as they are often guaranteed to lose money. The term "toxic
asset" was coined in the financial crisis of 2008/09, in regards to mortgage-backed
securities, collateralized debt obligations and credit default swaps, all of which could not
be sold after they exposed their holders to massive losses.
Security: An instrument representing ownership (stocks), a debt agreement (bonds) or
the rights to ownership (derivatives).
Hedge: Making an investment to reduce the risk of adverse price movements in an asset.
Normally, a hedge consists of taking an offsetting position in a related security, such as a
futures contract.
Market-making: A broker-dealer firm that accepts the risk of holding a certain number
of shares of a particular security in order to facilitate trading in that security. Each market
maker competes for customer order flow by displaying buy and sell quotations for a
guaranteed number of shares. Once an order is received, the market maker immediately
sells from its own inventory or seeks an offsetting order. This process takes place in mere
seconds.
46
Table 1: Presence of Economic Viability Frame
Statements of Impact on
% of (+) statements
U.S. market
19.6
U.S. bank
7
U.S.-based company
4
Total
27
% of (-) statements
16
32
8
43
Total % of Articles with
Presence of Economic
Viability
48%
Table 5: The Explanation of Terms in Dodd-Frank Act
% of articles that Mention
% of articles that Explain
Term
Derivatives
30.4
3.6
Proprietary Trades /
8.9
5.4
Trading
Swap
14.3
0
Swap dealer
5.4
0
Security-based swap
5.4
0
Futures
10.7
0
Toxic Assets
5.4
0
Securities
33.9
0
Hedge
37.5
0
Market-making
5.4
0
Table 4: Source Representation
Politician
% Of articles
that Mention
Financial
Industry
Economist
60.7
10.7
57.1
Table 3: Presence of Political Frame
Statements
Bipartisan effort of Dodd-Frank
General bipartisan effort
Political disagreement
Politician v. Non-Politicians
Politicians
Consumer
Advocacy
Group
16.1
% of articles that Discuss
3.6
8.9
26.8
23.2
57.1
47
Table 5: Presence of Economic Reform
Statements
Financial Crisis
(+) Housing market
(-) Housing market
(+) Job market
(-) Job market
% of articles that Discuss
67.9
3.6
3.6
3.6
5.4
48