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The Committee on Capital Markets Regulation says Dodd-Frank rules lack cost-benefit analysis

Hal Scott

In a Wednesday letter to Congress, the Committee on Capital Markets Regulation expressed “deep concern about the inadequacy of cost-benefit analysis” that the committee’s research has revealed in proposed rules of the Dodd-Frank Act.

CCMR, an independent, non-partisan committee, found through its research that more than one-quarter of the 192 final proposed rules under Dodd-Frank have undergone no cost-benefit analysis. The committee also found that more than one-third of the rules have completely non-quantitative cost-benefit analysis.

CCMR’s research also found that a large portion of the 50 rules containing quantitative analysis are limited primarily to administrative costs but fail to elaborate on the rule’s possible impact.

“It would be an unfortunate outcome if after the Dodd-Frank rulemaking process has run its course for several years, much of the rulemaking is invalidated because of its inadequate cost-benefit analysis,” the letter said.

According to Hal S. Scott, the director of CCMR and the director of the Program on International Financial Systems at Harvard Law School, legal challenges to the rules can be lengthy and risky for the economy.

“A recent D.C. Federal Appeals Court ruling that such rulemaking is not subject to direct appellate review means that the legal challenges of proposed rules will subject them to a long, tortuous path through the courts, beginning at the District Court level,” Scott said. “And that will result in the kind of prolonged uncertainty that can cripple economic activity.”

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