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Tab for Enforcing Financial Reform: $2.9 Billion


The 11 federal agencies tasked with enforcing the financial reforms laid out in last year's mega Dodd-Frank legislation are expected to run up a $2.9 billion tab in the first five years to cover the cost of their increased policing efforts. The bill for year one alone is estimated to be nearly $1 billion, according to a new report from the General Accountability Office. A big slice of that cost is to cover hiring more than 2,600 additional oversight staff across the agencies, with the newly created Consumer Finance Protection Bureau (CFPB) accounting for nearly half of the new hires.

That hefty price tag is sure to be quite the talking point tomorrow when the oversight subcommittee of the House Financial Services Committee is scheduled to convene a hearing on the cost of Wall Street reform. House Republicans have been angling to scale back, if not outright get rid of much of Dodd-Frank, and it was Republicans on the Financial Services committee that asked GAO to prep the report in advance of the cost hearing.

Close to three billion dollars is indeed a serious chunk of change. Many critics of Dodd-Frank point out that the final watered-down version of the bill lacks teeth that would have prevented the last crisis. Moreover, there's a pretty sound argument that the fix needn't require piling on more regulations when a big part of what went wrong is that existing regulations already on the books weren't enforced.

Still, I look at $2.9 billion as a pretty good deal if it in fact steps up Washington's oversight game. I realize that's a pretty big if given Washington's recent track record at policing the financial services industry. But I'm going to stick with the notion that this is an area where doing something -- flaws and all -- is better than doing nothing. And the creation of the CFPB is a definite win for consumers, if it in fact is ever given the ability to operate as the law intended.


Some points to consider as the $2.9 billion price tag for implementing Dodd-Frank is sure to get plenty of air and blog time in the coming days:

  • It's not all coming directly out of taxpayers' pockets. Only three of the 11 agencies with Dodd-Frank oversight get their funding directly from Congressional appropriations. The others rely on money they collect from the businesses they oversee, or from revenues they collect. But that's not to say we're off the hook here...
  • We'll probably pay for it nonetheless. We have to look no further than the recent push by banks to get rid of free checking and ramp up fees to offset revenues they lost as a result of 2009's consumer friendly credit card reform. When banks take a hit to their revenues, it's the customers who pay. That's just the nature of the beast. But if at the same time, the existence of Dodd-Frank means there's a more robust police force in D.C. stepping up the oversight, there is at least a potential benefit to those costs.
  • Isn't consumer protection worth $2.9 billion all by itself? Disagree? The comments section below is open. Have at it. But the way I see it, the fact that the financial industry -- through the bidding of some House Republicans -- is borderline apoplectic about Elizabeth Warren and the creation of the CFPB is a signal that she and the bureau are on to something very worthwhile. Nobody makes a fuss over nothing. You make a fuss when you feel threatened. And the prospect of the CFPB policing the financial services industry in the name of the consumer is a very big threat to the financial sector. Good. If the existence of a consumer watchdog -- and assuming said dog is given a long enough leash to be effective -- means more transparency that pushes both the financial services industry and consumers to make wiser choices, we'll all have gotten our money's worth out of the $2.9 billion investment.

Photo courtesy of Flickr user speakerpelosi
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