I have written several blog posts explaining why Dodd-Frank creates more problems than solutions. But, I was shocked to see my friends at the New York Times are now calling the legislation a jobs program, of all things, because it has created work for accountants and compliance officers.
... the law has spawned a host of new businesses to help Wall Street comply - and capitalize - on the hundreds of new regulations.
This "jobs program" nonsense is another example of the broken window fallacy, made famous by Frédéric Bastiat, the 19th century French economist.
In his story, the son of a shopkeeper breaks a store window. Bastiat argues that while the shattered window may be a monetary gain for the worker hired to fix it, we will never see where else that money might have gone. Likewise, destroying property (or drafting complex legislation) is not exactly sound economic policy.
The TowerGroup, a technology research firm cited in the NY Times article, estimates that banks are spending nearly $4 billion until 2013 to upgrade technology to meet regulations set in the Dodd-Frank bill. The paperwork and legal fees are also piling up.
Barclays said earlier this summer that it has spent more than £30 million, or $48 million, on outside advisers and in-house staff to draft its living will. Each of the five biggest Wall Street banks and several other large financial companies could easily spend just as much.