Regulation: As we've written, the Dodd-Frank Act has been one of the most damaging pieces of regulation in recent history, making it harder for small banks to grow and profit, while ensuring that "too big to fail" remains very much alive for the biggest, wealthiest banks.
Americans' eyes glaze over when Dodd-Frank, which just passed its sixth birthday on July 21, is mentioned. After all, it's pages and pages and pages of mind-numbing rules. A recent poll found that 63% of Americans didn't even know what Dodd-Frank was.
A new study suggests Americans would be wise to pay more attention. Research by the American Action Forum (AAF) says that, during its brief six years of existence, the Dodd-Frank law has cost the U.S. more than $36 billion and imposed 73 million paperwork hours on American financial businesses.
In its report last year, the totals were $24 billion and 61 million paperwork hours in just one year.
Put on a more personal basis, the costs are equal to roughly $112 per person, or $310 per household. In short, it's a tax that you're paying, whether you realize it or not.
The upshot is that this cost is born by the economy. Based on the above numbers, says American Action Forum, "it would take 36,950 employees working full-time (2,000 hours annually) to complete a single year of the law's paperwork, and those are based on agency calculations." In short, Dodd-Frank's paperwork alone costs roughly 37,000 jobs.
As if that weren't enough, other research by the AAF finds that Dodd-Frank -- and the so-called Consumer Financial Protection Bureau that was created by the law -- have resulted in a 14.5% drop in revolving consumer credit.
"From a housing market still experiencing mediocre growth, to an uneven labor picture, to significant consumer impacts, it's clear the law has fundamentally altered capital markets and added layers of complexity for individuals and financial institutions," wrote AAF researchers Sam Batkins and Dan Goldbeck.
And it will get worse. Federal financial regulators still need to write at least 61 additional rules to implement the law, passed in 2010 at the tail-end of the financial crisis. Those rules will add billions more in costs to the banking sector -- and therefore to consumers.
One of the promises made back when Dodd-Frank was being discussed was that it would end "too big to fail" for the big banks. Not only did it not end that pernicious practice, it has exacerbated it. The top 5 banks have expanded their share of banking assets since Dodd-Frank. They not only didn't kill "too big to fail," they super-sized it.
As we pass Dodd-Frank's sixth birthday, let us all firmly resolve that it not see its seventh.
