The infamous Sarbanes-Oxley Act of 2002, which imposed stringent box-ticking on all quoted US business and created vast amounts of work for accountants, was just 66 pages long. Mark Perry, an economist at the American Enterprise Institute, has crunched the numbers; they confirm that the US economy is about to be overwhelmed by an unprecedented torrent of red tape. It took only 31 pages in 1913 to create the US central bank and the entire Federal Reserve System with all its component banks, as well as the “new” US currency. In stark contrast, Perry notes, the table of contents (15 pages) and the list of definitions (11 pages) in Dodd-Frank are almost as long as the entire Federal Reserve Act. And what about the Glass-Steagall Act of 1933, so beloved of the Left? It overhauled America’s banking system in a much more dramatic way than Dodd-Frank ever will and yet took only 37 pages of legislation – 1.6 per cent the number of pages in the present bill. In fact, Perry calculates that the combined size of the five previous major US financial bills come to only 340 pages, one-seventh the size of the preposterous Dodd-Frank.
It is not just in finance that gargantuan and excessively complex legislation has become the norm in the US: Nick Schulz, also of the American Enterprise Institute, compared the 2,074-page Obama Healthcare Bill (which sets up 183 new agencies, commissions and other official government bodies) to the 82-page Social Security Act of 1935 and the 74-page Civil Rights Act of 1964, legislation which had a much greater impact yet was much more concise. Of course, the size of a bill hardly tells the entire picture but it is a good pointer to its cumbersomeness.
Dodd-Frank is largely misguided but not all bad. Procedures are being set up to allow even the largest of firms to be wound down and to go bust in a controlled, managed manner. Dozens of small US banks have been liquidated over the past year; there is no reason why even giant firms cannot be closed and their investors wiped out without requiring bailouts. But US sources I trust have pointed out to me that the way the legislation is drafted could allow firms to be improperly seized by the authorities; it will also give huge powers to politicians who will decide whether or not a firm is to be wound down. This means that firms will have an incentive to kowtow to politicians and make donations to keep them on side – and that can only be bad news for property rights and democracy.
Good news for those of you who have still not entered our inaugural City A.M. awards: we’ve extended the closing date for entries to 29 July. We were flooded with panicked calls yesterday from readers concerned about missing the deadline – so don’t worry, you have another week. For full details, go to www.cityamawards.com