Can You Guess How Many Studies Financial Reform Requires?

Reform isn't easy. Beyond making tough decisions, it also apparently involves an awful lot of research. The 3,321 pages of financial regulation bills being melded together by Congress' conference committee contain an incredible number of studies to be completed: 74.

All 74 are listed at the end of the piece, for your perusal. To be fair, there is some overlap, but not much. Approximately four of the studies are nearly identical. The other 70 all investigate different aspects of finance, economics, lending, etc. So it's conceivable that those 70 could all end up in the final bill that Congress passes and the president signs.

That's a lot of studying. If you add up all the time allotted for these studies to take place, and did them back to back instead of simultaneously, then you'd be doing studies for almost 79 years. And of course, they'll also cost untold millions of dollars to undertake, but that money is not set aside in the bill, as it will show up as a part of the budgets of the various agencies Congress orders to complete the studies.

Who are those various agencies? At least 14 are named. The Government Accountability Office (GAO) has the lion's share of the work, however. It's responsible for 32 of the 74. The Securities and Exchange Commission (SEC) comes in second with 18. Next, the soon-to-be-established Systemic Risk Council has six to complete. The 18 remaining are spread around the other agencies, with several requiring multiple-party participation.

So why is Congress ordering these studies? A few reasons come to mind.

First, there's the legitimate reason -- because there's some complex issue that needs to be better understood before legislation should be written about it. Some of the studies that fit in this category include:

#38 - Macroeconomic effects of risk retention requirements
#61 - The SEC revolving door

Another reason for a study is to push off the responsibility for Congress doing something that it would rather not have to deal with right now. Here are a few prime examples:

#32 - Ending the conservatorship of Fannie Mae, Freddie Mac, and reforming the housing finance system
#49 - The industry's reliance on credit ratings

Then, there are those studies that are done to appease some wacky congressperson or special interest, which really have nothing to do with financial reform. Some examples include:

#14 - Oversight of carbon markets
#73 - Effect of drywall presence on foreclosures

Does Congress really need 70 studies? Of course not. Some of them are a complete waste of time. One intends to study the financial literacy among retail investors. Because Congress needs to know how well these investors -- who are risking their own firms' money -- understand finance? The reality is that policymakers can understand many, if not most, of the topics contained in these 70 studies if they read some academic literature or hold some committee hearings. Instead, they will impose dozens of studies on various agencies, costing taxpayers millions of dollars.

They are listed below. And here are the referenced bills for the House and the Senate (both .pdfs), in case you want to read the detail. Enjoy! (Note: The four subjects with an asterisk are the duplicate studies.)

finref studies full list 2010-06.PNG

And here's a key for the agency acronyms in the chart:

finref studies key 2010-06.PNG