Friday, September 09, 2011

Dodd-Frank Act, aka The 2010 Full Employment Act for Lawyers, Accountants, and Consultants

NEW YORK TIMES -- "Call it Dodd-Frank Inc. A year after Congress passed the broadest financial overhaul since the Great Depression, the law has spawned a host of new businesses to help Wall Street comply — and capitalize — on the hundreds of new regulations. Besides the lawyers, there are legions of corporate accountants, financial consultants, risk management advisers, turnaround artists and technology vendors all vying for their cut."

“It is a full-employment act,” said Gregory J. Lyons, a partner at Debevoise, where a team of a half-dozen lawyers has drafted 30-plus comment letters in the last six months. “The law is passed, but we are still reasonably early in the process,” Mr. Lyons said. “There is still a lot to be written.” 

The Sarbanes-Oxley Act of 2002 became a boon for the Big Four accounting firms as public corporations were forced to tighten compliance in the wake of the Enron and WorldCom scandals. Now, the Dodd-Frank Act is quickly becoming such a gold mine that even Wall Street bankers, never ones to undercharge, are complaining that the costs are running amok. 
 
No one yet is tracking all the money being spent to deal with Dodd-Frank (which in itself could be an entrepreneurial venture), but a back-of-the-envelope calculation puts it in the billions of dollars (see chart below)."


MP: The top chart above compares the number of pages in the Dodd-Frank Act to the page count for previous financial legislation.  One study estimated the compliance cost of the 66-page Sarbanes-Oxley Act (SOX) to be as high as $1.4 trillion.  If "size matters" for financial regulation, i.e. the number of pages translates into compliance cost, watch out: Dodd-Frank is almost 13 times bigger than SOX.   

HT: Dan Greller

10 Comments:

At 9/09/2011 9:39 AM, Blogger Ironman said...

It all pales in comparison to the number of pages it takes to document the U.S. tax code for modern reference.

 
At 9/09/2011 9:52 AM, Blogger morganovich said...

this stuff is wild.

when they said that all hedge funds had to become RIA's, we had to spend $800k complying.

then, it was overturned.

we sure didn't get that money back though. (nor did we want to be an RIA)

most of the work was putting down plans for every absurd contingency and process on paper.

we wound up with a book 600 pages long detailing such critical aspects of our operations as how we procure IT services and equipment.

the guys writing this nonsense should have to go through the process of complying with it themselves before they foist it onto others. it might help them understand just how odious and obstructive they are being.

 
At 9/09/2011 11:03 AM, Blogger Methinks said...

Morganovich,

Welcome to the world of regulated broker dealers. And if you think that stuff is ridiculous, you should see what they put us through.

I fear with Dudd-Frank, hedge funds are headed that way. It's a disaster.

 
At 9/09/2011 11:16 AM, Blogger Benjamin said...

Every year, a Department of Defense Authorization Act is passed, this year it is 1145 pages. Then a related Appropriations bill passes, about the same length.

For some reason, these two bills are never ridiculed for their numbing length and complexity, or cited as exemplary of federal boondoggling or coprolite.

But in fact, if you read the bills, you start to suspect that the large majority of outlays are waste or patronage.

 
At 9/09/2011 2:18 PM, Blogger bix1951 said...

and all the rest of us are made poorer
until the day the goose dies
and then we are all broke

 
At 9/09/2011 2:36 PM, Blogger Che is dead said...

This comment has been removed by the author.

 
At 9/09/2011 2:38 PM, Blogger morganovich said...

methinks-

i have been on the BD side of the ball.

it's absolutely staggering. (though i could tutor an average intelligence cocker spaniel to pass the series 7 in one afternoon)

 
At 9/09/2011 3:27 PM, Blogger Methinks said...

Morganovich,

i have been on the BD side of the ball.

And you are still sane. That is an awesome achievement. I wish I could have managed that.

(though i could tutor an average intelligence cocker spaniel to pass the series 7 in one afternoon)

Hardly a surprise. After all, FINRA developed it. About 80% of it is about running a muni bond syndicate. Arca forces all Market Makers to take it because, you know, what could be more important for an options MM to know than how to run a Muni bond syndicate?

 
At 9/09/2011 6:54 PM, Blogger morganovich said...

methinks-

the ethics part of the 7 is hilarious.

Q - it is ok to steal clients money

a. any time
b. sometimes
c. if no one is looking
d. never

regarding sanity, is anyone in this biz really sane?

i suspect that selective insanity is a competitive advantage.

 
At 9/10/2011 3:24 AM, Blogger Ron H. said...

"the ethics part of the 7 is hilarious.

Q - it is ok to steal clients money

a. any time
b. sometimes
c. if no one is looking
d. never
"

So, what's the correct answer - and how did your cocker spaniel answer it?

 

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