Republican and Democratic members of the House Financial Services Subcommittee on Oversight and Investigations sparred Wednesday over the costs of implementing the Dodd-Frank Act.
Republican members of the subcommittee voiced their concerns during a hearing entitled, The Costs of Implementing the Dodd-Frank Act: Budgetary and Economic, about the sheer size of the Dodd-Frank act and, as Rep. Randy Neugebauer, R-Texas, chairman of the Subcommittee, stated in his opening remarks, Dodd-Frank’s “far reaching impacts on our markets and on the cost of doing business and the cost of capital.”
Rep. Spencer Bachus (left), R-Ala., chairman of the full Committee, said that the cost of implementing Dodd-Frank was never “weighed” before the Act was passed into law. The “federal budget and businesses of all sizes will have to deal with the cost of implementing Dodd-Frank for some years to come,” Bachus said, and “Congress will not be able to rein in some of those costs.”
But Rep. Michael Capuano, D-Mass., said that the size of Dodd-Frank isn’t what matters, rather it’s whether the law “works.” Overall, he said, Dodd-Frank “is a good piece of legislation,” but there will be “bumps” during its implementation and Congress must continue oversight.
Rep. Joe Baca, D-Calif., added that Dodd-Frank “restores common sense to Wall Street,” and provides the nation with “the oversight necessary to prevent another collapse of our financial markets.” Baca said the Subcommittee’s hearing should have been entitled: “The cost of not implementing Dodd-Frank.”
As to the cost of Dodd-Frank, Douglas Elmendorf, director of the Congressional Budget Office (CBO), reiterated in his testimony the previous cost estimates released by CBO in June of 2010, which projects federal budget costs of Dodd-Frank to be $1.1 billion over the first 5 years of implementation. However, Elmendorf said that Dodd-Frank would reduce the deficit by $3.2 billion dollars between the 2010-2020 time period.
Rep. Barney Frank, D-Mass., ranking minority member on the House Financial Services Committee, released a statement the same day of the hearing in which he said a yet-to-be-released Government Accountability Office (GAO) study says that it will cost up to $2.9 billion over five years to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act.
However, “When the details of the report are made public, it will be important to put the cost analysis in proper perspective–there would be absolutely no cost to taxpayers if Republicans had not succeeded in stripping the funding mechanism from the bill during the conference committee,” Frank said.
“I and other Democrats proposed to pay for implementation of the legislation by placing a levy on financial institutions with assets greater than $50 billion and on hedge funds with assets greater than $10 billion,” Frank continued. “Many of these institutions benefited greatly from government intervention during the crisis and they will benefit in the future from the stability the law will provide to the markets. American taxpayers, many of whom were significantly harmed by the financial crisis, would have shouldered none of the burden for implementing the legislation.”
Douglas Holtz-Eakin, former CBO director who’s now president of the American Action Forum, added in his testimony that the CBO’s $ 1.1 billion cost estimate, in part, reflects the fact that the law creates 122 new councils, advisory committees, other panels, and consultation requirements. In addition, Holtz-Eakin said, the Congressional Research Service (CRS) estimates there are up to 330 rulemakings that will have open comment periods. “These are costly undertakings that will require taxpayer resources,” he said.
Elmendorf added that CBO has recently released its Preliminary Analysis of the President’s Budget for 2012. In preparing its analysis of the budget, he said, “the agency gleaned no information that would cause it to significantly change the cost estimate that it provided prior to the enactment of the Dodd-Frank Act.”