“Regulations do have costs; often, as a country, we have to make tough decisions about whether those costs are necessary.”
—President Obama, Wall Street Journal op-ed, January 18, 2011
Question: how many man hours in compliance will the Dodd-Frank permanent bailout of Wall Street law cost the economy? Answer: 10.2 million…per year. As the Committee on Financial Services pointed out, that is almost double the man hours it took to assemble the 146 million iPhones in the world.
It might be helpful to recap how we got stuck with such an innovation-crushing regulatory burden. Last year, Democrats passed a 2,300-page law that mandated some 400 rulemakings, 65 studies, and a federal budgetary impact of $1.25 billion (FY2012). The financial regulators then set about writing all of those rules in what the New York Times referred to as the “lawyer full employment act.”
One such rule recently submitted for public comment was the so-called “Volcker rule” intended to limit federally insured banks from proprietary trading and making certain investments. At 298 pages, the rule has spawned countless pages of private sector legal analyses and summary memos. When the final rule is released it will no doubt span hundreds more pages in the Federal Register, and the process will repeat itself in a migraine-inducing cycle of complexity. Not to mention the executive branch already estimates this rule will cost banks $1 billion in compliance and capital raising. That is $1 billion that will not go into credit creation to fuel business expansion and job growth.
Sadly, this is just one rule. Referring to the Dodd-Frank regulatory growth, an op-ed in the Financial Times noted:
Officials from the Commodity Futures Trading Commission, for example, say that they have now received no fewer than 25,000 – yes, thousand – comments on the proposed rule reforms; some 15,000 relate to their reforms for commodity trading limits. And the CFTC is only one of the agencies involved in this feedback process. By law, regulatory officials then have to read each and every comment before anything can be done; and those submissions can sometimes stretch – you guessed it – to several hundred pages each. That [2,300] page number, in other words, now multiplies a thousand-fold, if not ten-thousand-fold, across the system as a whole; it makes a collateralised debt obligation look almost simple.
Yet can anyone say with certainty that the financial sector is more secure as a result? Financial columnist Nicole Gelinas has called this “financial security theater.” And the biggest losers in this paper shuffle are the 14 million Americans out of work and the private sector job creators who just want Washington to get out of the way.
What are House Republicans doing?
House Republicans are focused on continuing efforts to turn around the Obama economy by passing major elements of the House Republican Plan for America’s Job Creators. As Rep. Steve Stivers (R-OH) wrote in an op-ed for the Washington Times last week, business leaders are unfortunately devoting more time and attention to complying with new regulations than expanding their businesses and hiring. H.R. 1539, passed by the Committee on Financial Services, would repeal a provision of Dodd-Frank that threatened to destroy the asset-backed securities market and now remains on the books in a state of permanent non-enforcement. The bill, introduced by Rep. Stivers, would end a small fraction of the uncertainty that is killing our economy.