May 09, 2016 - 11:00am

Dodd-Frank’s Regulatory Nightmare in One Rather Mesmerizing Illustration


Executive Director, Communications & Strategy

Can a nightmare, as Beyoncé once claimed, really be beautiful?

In this particular instance, absolutely.

In the slightly mesmerizing illustration below, economic researchers at George Mason University's Mercatus Center mapped out some of the more than 27,000 new federal regulations linked to the nightmarish Dodd-Frank law, which was enacted in 2010 in the wake of the financial collapse. What you’re looking at is the total number of restrictions that have been issued by the 10 federal agencies most affected by the law, as well as which industries those particular rules and restrictions targeted.

Once you snap out of the hypnosis induced by staring at that image, here’s a more thorough explanation from the Mercatus Center research team:

A thin line means the agency has produced between 10 and 100 industry-relevant regulatory restrictions, a medium line indicates the agency has produced between 101 and 1,000 industry-relevant regulatory restrictions, and a thick line means that the agency has produced more than 1,000 industry-relevant regulatory restrictions.

It’s important to note, as the researchers point out later, that they included only the 10 most impacted industries and agencies in order “to make the figure comprehensible.” So, you ask, how many agencies have had to issue new regulations tied to Dodd-Frank? Good question. A whopping 32 federal agencies have had to issue new rules under the law.

Okay, but how does that compare to previous financial reform laws? Maybe this is just par for the course when regulators set their sights on banks and the financial sector.

In order to test that theory, let’s look at the last major Wall Street overhaul before Dodd Frank: the 2002 Sarbanes-Oxley Act, which basically sought more corporate transparency and accountability. Here’s the exact same regulatory map from Mercatus, but this one’s for Sarbanes-Oxley.

Not nearly as mesmerizing, right?

Right away, you’ll notice that there are only two agencies and five industries included in the illustration. That’s because the Sarbanes-Oxley, which featured its own fair share of regulatory hurdles, only required two D.C. agencies to issue new restrictions, and those restrictions only directly targeted five sectors of the economy (though the law and its corresponding regulations certainly had an indirect impact on other industries).

Notice, too, that there are no thick or even medium lines zig-zagging across the Sarbanes-Oxley illustration, a la the Dodd-Frank graphic. Naturally, that’s because there were many fewer unique restrictions required under the earlier law – as in 10 times fewer (Sarbanes-Oxley was associated with 2,200 new rules and restrictions).

“As a regulatory act of Congress, Dodd-Frank is singular both in size and in scope,” the researchers wrote, adding that the law “is associated with more new restrictions than all other laws passed during the Obama administration put together.”

While the number of new regulations linked to a law don’t tell nearly the entire story regarding its impact on the private sector, these illustrations start to shed some light on the unprecedented impact Dodd-Frank is having on businesses not only in the financial sector, but in every virtually industry across the country.

It’s time we start fixing what the law got wrong, so we can start building a smarter and more manageable regulatory regime that supports rather than slows economic growth. If not, that first illustration will only continue to grow more busy, its lines will continue to thicken, and thousands of job-creating businesses will continue to struggle under the weight of these new and onerous regulations.

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About the Author

About the Author

J.D. Harrison
Executive Director, Communications & Strategy

J.D. Harrison is the Executive Director for Strategic Communications at the U.S. Chamber of Commerce.