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  • The Regulatory Tsunami Headed Your Way

    When the Dodd-Frank financial-overhaul bill was passed last summer, it was done so with much of the fanfare and self-congratulation that has come to typify Washington. Then-Speaker of the House Nancy Pelosi (D-CA) called it the “toughest set of Wall Street reform in generations.” But the bill’s hype was not backed up with much substance. The legislation, which was sold as a response to the financial crisis, did not even address the problems of Fannie Mae or Freddie Mac and made TARP-style bailouts a permanent fixture of the government’s fiscal policy. And the impact of the law is already being felt as banks have begun to consider new fees on checking accounts and credit cards as a result of this burdensome new law. So much for siding with consumers.

    But despite this law’s troublesome aspects, the far more distressing feature of this 2,300 page behemoth is how much we don’t yet know about it. As we noted at the time, the law could more be aptly titled, “The Lawyers and Lobbyists Full Employment Act” as it left a massive amount of its implementation to regulatory agencies which will be bombarded by lobbyists jockeying for special favors.  In an effort to visualize the complexity and amount of unanswered questions left by the law, the US Chamber of Commerce has compiled a list of the “259 mandated rulemakings, another 188 suggested rulemakings, 63 reports, and 59 studies” required by the Dodd-Frank Wall Street “reform” bill into an interactive graphic which we have pasted below.

    For a full-size version of the chart, visit the Chamber’s website.

    Posted in Economics [slideshow_deploy]

    5 Responses to The Regulatory Tsunami Headed Your Way

    1. David Brunjes Lake F says:

      This is really scary. And as you click on many of the bubbles, you see "authority to issue rules.." or something like that. This means that this is only the tip of the iceberg. Plenty more to come… Our Federal Government still doesn't get it, and President Obama is misleading us with his talk of the agencies working towards reducing regulations. Stop with the political nonsense already. Do the right thing.

    2. Leon Lundquist, Dura says:

      It is Unconstitutional prima facie, that Regulators are making Laws instead of Congress! These new Dictators belong in Jail, not in the hallowed chambers of Government! It is Unconstitutional for the Congress to pass Laws unread, that is what Representation means, they have to Represent after all, and if you don't read the Bills you did not Represent, rather, and I think it is criminal, against their Oaths of Office they did not uphold the Constitution, they did not Represent their constituents!

      What a wonderful illustration this is! Thanks Heritage Foundation, we need you guys more than ever! The Demo crats did so much damage there isn't enough time to undo it all. I think the only answer is to bring it to a Constitutional Crisis! Obama's Administration is an Unlawful Dictatorship! The House could take it all down with a nice RICO Investigation! Seriously, the House can declare these Forms of Government Unconstitutional! The Supreme Court will have to Rule on it after that. The whole reason we have the First American Communist Government right now is that the Supreme Court never Ruled on it! It has been a criminal negligence going on for One Hundred Years!

    3. Rock Cramer, Parker says:

      Why do market bubbles continue to repeat in history? Why have they occurred with increasing frequency in the in the past sixty years? It’s all about how the federal government tries to “REGULATE” FREE MARKETS BY SHIFTING ACCOUNTABILITY and therefore the consequences of failure and poor judgment, away from the responsible participants. As Melchior Palyi (Inflation Primer, 1962) points out, it’s often about how responsibility for credit safety has been shifted away from those who actually originate the credit.

      The recent housing market collapse provides a fine example. From 2001 to 2007, house prices doubled in many regions (the national average increase was 56%) The cumulative increase in the Consumer Price Index (CPI) over the same period was less than 20%. Someone somewhere was creating a massive amount of liquidity (credit) in the housing market in order for prices (home values) to go up so radically in so short a period. The culprits are Congress, the mortgage financing creatures it created and enabled (“Fannie Mae,” “Freddie Mac”, FHA, etc.), the risk shifting financial regulations derived from laws it passed and the mandates it imposed on mortgage originators to reduce borrower qualification requirements to little more than a heart beat–all in the name of “affordable housing.”

      The “Agencies,” Fannie and Freddie, (with implicit federal government guarantees) acquired over $6 trillion in single family loans from 1993 to 2008– creating massive liquidity using leverage ratios that exceeded 30 to 1. The big commercial banks, through their “off balance sheet” “structured investment vehicles” (SIV’s) were also playing in this high leverage credit sandbox as well as the investment banks (Goldman Sachs, Lehman Brothers, Bear Stearns, etc.). One could hardly describe this as anything but “Quantitative Easing” on steroids for home financing. They were slicing and dicing home and commercial mortgage debt into mortgage backed security “derivatives” (MBS’s) that the rating agencies were blessing with undeserved credit ratings.

      Liquidity creation for mortgages and the associated run up in home and commercial asset values were effectively OFF THE RADAR SCREEN for the Fed, the three rating agencies and all the other federal regulatory bodies charged with oversight of banking, securities, housing and commercial property. Why? This is mostly a “NATIONAL BALANCE SHEET” phenomenon. Homeowner net worth goes up and mortgage and consumer credit go up. If asset values and available credit go up in tandem, they have little effect on the cost of living and other traditionally monitored inflation indicators.

      The MBS derivative sandbox obviously had no adult supervision. Where were the regulators? What is the point of all the volumes of regulations and legions of regulators that demand compliance from anyone participating in these markets? Do we really need a “Systemic Risk” regulator to tell us when aggregate credit in the U.S. economy rises from 225% of GDP to over 350% of GDP (as it also did in the 90’s stock market run-up)?

      The problem has never been too few regulators and too few regulations, quite the contrary. Too many regulators become a “Who’s on First” skit. Massive regulations provide nothing more than an illusion of security. Bureaucrats have no skin in the game. Motivated self-interest will always be way out in front of them. Only “stakeholders” (debt holders, equity owners, employees and high dollar depositors) are capable of policing “corporate excess.” This means no “bailouts” in any form and no regulatory illusions of risk mitigation or of uncertainty mitigation. Self-discipline and self-restraint go out the window when government goes beyond the boundary of simply enforcing the abstract rules of commerce which are mostly about ACCOUNTABILITY AND TRANSPARENCY. Government, in other words, should just allow free markets to work and enforce the rule of law.

      So let’s see…the federal government usurps states rights by creating Agencies and regulations that remove oversight and credit safety in the home financing market from state and local governments…almost certainly unconstitutional from the perspective of our Founders. From the perspective of Austrian School economists, this allowed the diverse and unassociated credit safety decisions of the very many mortgage originators (local banks, savings & loans, mortgage brokers, etc.) that could pose no “systemic risk” to our nation to be concentrated in the hands of a very few that could and did. In the meantime the Fed and all the regulators were asleep, oblivious to what was going on in the housing credit and securities markets. A more perfect testimonial to the wisdom of our Founders and free market economists would be hard to find.

    4. T.A. says:

      The Communists are winning…

    5. Roger says:

      Can you say Cass Sunstien? You can if you allow folks like Castro, Chaves, Putin idealogs in our great Republics White House to govern. Folks are scared to death to speak up, and some are just to lazy and really don't care as long as they get theirs. More regulations would be huge job killers. More unemployed and more serfs for Big Government to control.

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