Insight

Sam Batkins

The Dodd-Frank Act, signed into law in 2010, included nearly 400 new financial regulations. Examining every Dodd-Frank regulation reveals $39.2 billion in total costs and 63.7 million paperwork burden hours. But that’s not the entire story. During testimony before the Senate Banking Committee, Doreen Eberley of the Federal Deposit Insurance Corporation stated, “We certainly do try to carry out the cost-benefit analysis under our policy on rulemaking. We consider the cost, the benefits, and alternatives, based on available data.”

Regulators do try, but they often fail. Digging deeper, agencies have failed to monetize 35.8 million hours of Dodd-Frank compliance from 51 different regulations. In other words, they reported extraordinary regulatory paperwork burdens, but never translated these burdens into a routine cost-benefit analysis.

The cost of compliance varies depending on who is doing the work, but whatever the figure, 35.8 million hours is a substantial burden to remain unexamined. This hourly figure adds up to 1,493,463 days worth of regulatory compliance, or 4,092 years. To put 35.8 million hours in economic terms, assuming a regulatory compliance officer worked 2,000 hours a year, it would take 17,922 officers to complete one year of this paperwork; and regulators proclaim that it costs nothing.

There are ways to fill in the gaps that regulators leave for the public. The average salary of a regulatory compliance officer is $32.10 per hour. Applying this figure to the 35.8 million hours that regulators failed to monetize yields $1.1 billion in additional compliance costs. This means Dodd-Frank’s cumulative cost would be $40.3 billion. Another way to calculate the costs is by using the Gross Domestic Product per hour worked, $60.59. This yields more than $2.1 billion in costs that regulators did not attempt to monetize. They might try to conduct a cost-benefit analysis, but they routinely omit elements of both. For example, more than 95 percent of Dodd-Frank regulations have failed to monetize possible benefits.

Major Rules, Major Failures

During Dodd-Frank’s four and a half year regulatory existence, it has produced hundreds of final rules. Of these, regulators have finalized 47 “major” rules, or measures with “an annual effect on the economy of $100 million or more.” Below are the major Dodd-Frank rulemakings by agency, with the Commodity Futures Trading Commission leading the pack.

Major Dodd-Frank Rules by Agency

Agency Major Rules Commodity Futures Trading Commission 19 Comptroller of the Currency 3 Consumer Financial Protection Bureau 5 Federal Reserve 1 Securities and Exchange Commission 18 Department of Treasury 1 Total: 47

Combined, these 47 major rules have produced more than $12.5 billion in total costs and 15.6 million paperwork burden hours. However, 16 of the major rules failed to monetize the cost of the regulation. According to Maryann Hunter of the Federal Reserve, “It’s easy to measure the cost because they fall to specific institutions.” Yet, for the Federal Reserve’s “Debit Card Interchange” major rule, it declined to monetize the costs of the measure and there are more than a dozen other regulations where costs are absent.

Looking broadly at all 47 major rules reveals a paucity of formal regulatory impact analyses. According to regulations.gov, the online database of rulemaking dockets, only four major rules included a corresponding regulatory impact analysis when posted on regulations.gov. If measuring costs is so easy, it seems that posting analyses on an open government site would be more than feasible for federal agencies dedicated to transparency.

Conclusion

Regulators proudly trumpet their transparency before oversight committees, but digging deeper into the data reveals that claims of an honest accounting of costs and benefits are hollow. Dodd-Frank regulations have failed to monetize more than 35.8 million hours of paperwork, an estimated $2.1 billion in costs. Within their 47 major rules, only 31 provided cost estimates and benefit figures are rarely listed. Regulators could certainly improve both the transparency and the precision of cost-benefit analyses, consistent with congressional intent. When done well, these analyses contain information crucial to the lives of citizens and businesses, and can promote a critical element of transparency at a time when federal regulators arguably have more power than ever.