Financial Regulatory Reform - Uncertainty Grows

by Tom Quaadman

One of the selling points used by the Administration and Congressional leadership in pushing the Dodd-Frank bill is that financial regulatory reform is needed to do away with the uncertainty that has plagued the economy since the financial crisis erupted in 2008. The pitch goes that business needs clear rules of the road in order to access capital and the uncertainty in the marketplace has frozen monies that could otherwise be used to fund business expansion and job creation.

There is a lot of truth to this argument and as the Senate moves to pass the bill later this week the question is, how does the Dodd-Frank bill do in removing uncertainty? You don’t have to look further than the work that will go into implementing the bill to see that it misses the mark.

The final bill leaves the regulators with quite some work to do -- 520 rulemakings, 81 studies and 93 reports*. To put this into perspective, Sarbanes-Oxley required 16 new regulations and 6 studies. That’s right, the Dodd-Frank bill is over 30 times the size of SOX.

Trying to write and implement these new regulations and the litigation that follows will take years to do. In fact some have speculated that the Volcker rule itself may take up to 10 years to fully put in place. That means an extended period of confusion and lack of clarity as to what the rules are. This is bad because confusion leads to hesitancy to deploy capital, reducing economic growth and job creation.

The Chamber has long-called for updating our Depression-era regulatory system to match a 21st century economy. Instead it looks like Congress wants to add more rooms onto the building that sits on a crumpling foundation.

Not the way to get rid of uncertainty or grow jobs, unless you are a bureaucrat or a lawyer, in which case, this is the bill for you.

*Updated 21 July 2010 from 533-60-94.