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.
Archive for July 18th, 2010
Posted in Bailout, Barney Frank, Easy money, Fannie Mae, Federal Reserve, Financial Crisis, Freddie Mac, Regulation, tagged Bailouts, Barney Frank, Chris Dodd, Fannie Mae, Financial Crisis, Freddie Mac, Red Tape, Regulation on July 18, 2010 | 16 Comments »
The White House on Wednesday issued new rules requiring health insurance companies to provide free coverage for dozens of screenings, laboratory tests and other types of preventive care. The new requirements promise significant benefits for consumers — if they take advantage of the services that should now be more readily available and affordable. …The rules will eliminate co-payments, deductibles and other charges for blood pressure, diabetes and cholesterol tests; many cancer screenings; routine vaccinations; prenatal care; and regular wellness visits for infants and children.
…let’s look at the failed stimulus program of Obama’s hero, Franklin Delano Roosevelt. FDR’s Treasury Secretary, Henry Morgenthau, wrote in his diary: “We have tried spending money. We are spending more than we have ever spent before and it does not work. … We have never made good on our promises. … I say after eight years of this Administration we have just as much unemployment as when we started … and an enormous debt to boot!” Morgenthau was being a bit gracious. The unemployment figures for FDR’s first eight years were: 18 percent in 1935; 14 percent in 1936; by 1938, unemployment was back to 20 percent. …During the Roosevelt administration, the top rate was raised at first to 79 percent and then later to 90 percent. Hillsdale College economic historian Professor Burton Folsom notes that in 1941, Roosevelt even proposed a whopping 99.5 percent marginal rate on all incomes over $100,000. …The Great Depression did not end until after WWII. Why it lasted so long went unanswered until Harold L. Cole, professor of economics at the University of Pennsylvania, and Lee E. Ohanian, professor of economics at UCLA, published their research project “How Government Prolonged the Depression” in the Journal of Political Economy (August 2004). Professor Cole explained, “The fact that the Depression dragged on for years convinced generations of economists and policy-makers that capitalism could not be trusted to recover from depressions and that significant government intervention was required to achieve good outcomes. Ironically, our work shows that the recovery would have been very rapid had the government not intervened.” Professors Cole and Ohanian argue that FDR’s economic policies added at least seven years to the depression.