The Wall Street Journal opines about the number of new regulations that will be generated by the so-called financial reform legislation that has been approved by Congress. The big winners will by lawyers, the federal bureaucracy, and politicians. The big losers will be shareholders and consumers.
The Dodd-Frank financial reform bill passed by the Senate yesterday promises to generate historic levels of red tape. But apparently the 2,300 pages are so complicated that a debate has broken out over precisely how many new regulatory rule-makings it will require.
This week we reported on an analysis by the Davis Polk & Wardwell law firm that at least 243 new federal rule-makings are on the way, not to mention 67 one-time studies and another 22 new periodic reports. The attorneys were careful to note that this was a low-ball estimate, counting only new regulations mandated by the bill.
Now comes Tom Quaadman of the U.S. Chamber of Commerce, who doesn’t quarrel with the Davis Polk estimate but has added rule-makings authorized by this legislation to those that are mandated and says that American businesses should expect a whopping 533 new sets of rules. To put this number in perspective, Sarbanes-Oxley, Washington’s last exercise in financial regulatory overreach, demanded only 16 new regulations. Thus he reasons that Dodd-Frank “is over 30 times the size of SOX.”
…While it might seem that the regulatory uncertainty created by the bill won’t last much longer than a decade as new rules are implemented, that also could be optimistic. When regulators are granted new authorities without expiration dates on their powers, the rule-making possibilities are infinite.
…The most likely result of Dodd-Frank in the near term is a generally higher cost of credit, and a bigger market share for the largest banks that can more easily absorb the new regulatory costs. In the longer term, do not expect it to prevent the next financial mania and panic.
