After four years of execution and practice, it is difficult to assess just where the housing market would be if Dodd-Frank never went into effect. Would the market be better off or is that even quantifiable?
The mortgage market, en masse, seems to think two things. The first is that the impact of Dodd-Frank is, indeed, very quantifiable. And second, given the sum of its parts, everyone should hate Dodd-Frank.
As mentioned in an article from the American Banker, "In a rare public exchange in June 2011, Jamie Dimon asked then Federal Reserve Board Chairman Ben Bernanke what the total economic costs of the year-old Dodd-Frank Act would be.
"Has anyone looked at the cumulative effect of all these regulations, and could they be the reason it's taking so long for credit and jobs to come back?" the head of JPMorgan Chase said.
"Jamie Dimon was so criticized for asking that question directly to Chairman Ben Bernanke," said H. Rodgin Cohen, a partner at Sullivan & Cromwell and a leading banking lawyer. "That was not a loaded question. He wasn't saying, 'It was horrible.' He was saying, 'Has anybody looked at it?' — which is a very legitimate question. I don't think anybody can say they have answered that question."
Not so fast. According to one think tank, it's time to look at the real facts; that is, money.
According to Senior Fellow Ellen Seidman at the Urban Institute’s Housing Finance Policy Center, assessing the impact of Dodd-Frank is extremely difficult, turning on a mix of factors that is often hard, indeed occasionally impossible, to disentangle. While it's not impossible, Seidman's comments indicate, the final result may not be 100% accurate either, based on several confounding factors.
The institute even dove into the data to better understand the interplay of market forces, regulations, laws and other factors, including looking into the number of “missing mortgages” that could have been made in 2012, the likely effect of HAMP resets and the impact of the Qualified Mortgage rule.
“While we applaud the call for more and better analysis, we recommend humility in the face of complexity and perhaps a healthy dose of skepticism, especially about results in the form “the regulations cost consumers—or businesses—‘X’ dollars a year,” Seidman said.
“As the problems these rules are intended to address don’t lend themselves to simple solutions, the rules’ impact on our complex economy is not likely to be easy to discern,” she continued.
However, there are elements to the act that are measurable. For example, “As a Davis Polk & Wardwell progress report on the legislation indicates, the deadlines for 280 rulemaking requirements have passed, as of July 18,” SNL analysts J. Daniel Young and Jasmine Castroverde said. “Of those, 127 deadlines were missed. Of the 398 total required rulemakings contained in the bill, 96 have yet to be proposed.”
"So how does one measure the positive impact of rules like those in Dodd-Frank against whatever costs are found, particularly where the positive impacts are likely years out and potentially even more difficult to quantify than the costs," Seidman asked. "Indeed, how do you assess the positive impact that Dodd-Frank rules will have on increased financial stability and consumer safety in a system whose collapse recently cost the world’s economy trillions of dollars?"
While Dodd-Frank has been around for four years, Seidman argued that the true impact of the act can never be quantified due to the complexity of the law, and several other mitigating factors that won't easily subside.
In time, one can only reason, a compendium of metadata will require cramming in such a way that only a faint taste of the Dodd-Frank Act's cost can be accurate, verifiable and quantitative.
This, of course, will likely come as little consolation to the mortgage bankers out there who feel the reform is killing their livelihoods.