Neugebauer Announces Subcommittee Hearing To Review Economic And Budgetary Costs of Dodd-Frank Implementation
Washington,
March 24, 2011 -
The Oversight and Investigations Subcommittee, chaired by Rep. Randy Neugebauer, will hold a hearing to examine the costs and economic impact associated with implementing the Dodd-Frank Act. The hearing will take place on Wednesday, March 30 at 2 p.m. in room 2128 Rayburn.
Subcommittee Chairman Neugebauer said, “We knew the Dodd-Frank Act would result in a bigger federal government, but we’re just now coming to understand the magnitude of its costs to the struggling U.S. economy. This type of analysis should have been done prior to enactment. Since the Dodd-Frank Act orders more than 300 regulations to be written, it is imperative for agencies to undertake a rigorous cost-benefit analysis of each one to minimize these costs to the economy.”
Financial Services Committee Chairman Spencer Bachus said, “At a time when our economy already struggles with high unemployment, the Dodd-Frank Act will inundate job-creators and consumers with a flood of new Washington rules and mandates. Congress has a responsibility to fully understand the costs that its actions will have on employers, citizens and government spending. Now that the Committee and the House are under new leadership, we will begin reviewing this new law’s impact on our budget and economy and minimize its negative effects as much as possible.”
The hearing, entitled “The Costs of Implementing the Dodd Frank Act: Budgetary and Economic,” will provide an assessment in dollar terms of the direct costs to taxpayers of implementing the Act as well as quantify its broader economic costs.
During the debate on financial regulatory reform, there was little consideration given to the costs of creating new bureaucracies and a permanent bailout fund. For example, while the Administration claimed the Dodd-Frank Act brought an end to taxpayer bailouts, the Administration’s own budget request for FY 2012 calls for $19.5 billion in taxpayer dollars to fund the bailout authority. New offices created by Dodd-Frank were given unprecedented authority to set their own budgets. The new Office of Financial Research has no limitation on its funding, and is able to draw money from the Federal Reserve to fund its operations. The Director of the newly-created Consumer Financial Protection Bureau (CFPB) is also able to determine the bureau’s budget from a mandatory transfer of funding from the Federal Reserve. The amount of this mandatory transfer (10 percent of the Fed’s operating budget this year, 11 percent in 2012, and 12 percent in 2013, where it will stay fixed in perpetuity) essentially hands the Director of the CFPB $500 million. If the Director deems $500 million insufficient, the Dodd-Frank Act authorizes the CFPB to seek appropriations of up to $200 million for a grand total of $700 million or more per year.
The indirect costs associated with the Dodd-Frank Act will also be a focus of the hearing. Employers will have to spend more on compliance, resulting in reduced economic activity as their capital will be diverted from more productive uses, including hiring and investment.
Scheduled to testify:
Panel I:
Douglas W. Elmendorf, Director, Congressional Budget Office
Jill E. Sommers, Commissioner, Commodity Futures Trading Commission
Jeffrey Lacker, President, Federal Reserve Bank of Richmond
Panel II:
Douglas Holtz-Eakin, President, American Action Forum
James Angel, Assistant Professor of Finance, McDonough School of Business, Georgetown University
James Overdahl, Vice President, NERA Economic Consulting
