The Economist is not a fan of Dodd-Frank. The magazine’s latest complaints are familiar ones: the law is too bloated, impossibly complex, and burdensome to both banks and the economy at large. But the Economist also admits that it’s not just federal officials who are responsible for making the law so cumbersome: the financial firms being regulated have pushed for exemptions and reforms that have, in the process, also made Dodd-Frank more complex.


The Economist doesn’t go into the details, but a quick look at the numbers reveals just how intensively financial firms have devoted themselves to lobbying regulators on implementing Dodd-Frank. In 2011, for example, Goldman Sachs spent $4.3 million on lobbying, and the bank has held at least 129 meetings with federal agencies to influence how Dodd-Frank will go into effect. Morgan Stanley likewise held 103 meetings with regulators over the law, spending $3 million on lobbying last year. The big banks, from their perspective, are simply trying to minimize the harmful impact and unintended consequences of a bill that’s now the law of the land.

In theory, many of the law’s detractors and supporters agree that simpler regulations would be better. But it’s not that easy to put into practice: greater simplicity can also give regulators more discretion and power. The Consumer Financial Protection Bureau, for example, was created with the aim of consolidating consumer protection responsibilities that had been scattered between many different agencies into a single office. The Economist, though, counters that this move toward consolidation still adds to complexity by giving federal officials “the power to regulate more intrusively and to make arbitrary or capricious rulings.”

And that’s the real bind that Dodd-Frank faces as regulators try to turn the law’s blueprint into a reality: complex regulations might be better at minimizing unintended consequences, but they also tend to be more burdensome to comply with; simple regulations are clearer but tend to give regulators a heavier hand. It’s a conundrum that’s helped fuel the Republicans call to junk the law altogether.