The Costs of Implementing the Dodd-Frank Act: Budgetary and Economic

Testimony Before the Subcommittee on Oversight and Investigations of the House Financial Services Committee

By David Min | March 30, 2011

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SOURCE:Center for American Progress

CAP Associate Director for Financial Markets Policy David Min testifies before the Subcommittee on Oversight and Investigations of the House Financial Services Committee. Read the testimony (CAP Action).

Chairman Neugebauer, Ranking Member Capuano, and members of the subcommittee, my name is David Min and I am the Associate Director for Financial Markets Policy at the Center for American Progress Action Fund. Thank you for the opportunity to testify today on the very important topic of the costs of Dodd-Frank implementation.

In analyzing the costs of Dodd-Frank implementation, we should recognize that the Dodd-Frank Act was itself intended to reduce the very large costs associated with financial instability and systemic risk. Lest we have forgotten, let me recount some of these costs:

• Over $10 trillion in household wealth destruction, with the average household losing 23 percent of its stored wealth
• Nearly 10 million lost jobs
• Wage losses of approximately $3,250 per household
• 12 million expected foreclosures
• 30 percent peak to trough decline in home prices
• The opportunity costs of providing trillions of dollars in TARP and Federal Reserve support to restore and maintain liquidity in the financial markets

It is important to note that this type of major financial crisis, and the level of losses it caused, was once a regular occurrence in the United States prior to the passage of the New Deal-era banking and finance laws. Importantly, as experts across the ideological spectrum have concluded, we can expect to continue to regularly experience this type of financial crisis going forward unless we re-establish strong and effective regulatory oversight over our entire financial system. This fact must be considered in any cost-benefit analysis done on Dodd-Frank implementation.

CAP Associate Director for Financial Markets Policy David Min testifies before the Subcommittee on Oversight and Investigations of the House Financial Services Committee. Read the testimony (CAP Action).