Dodd-Frank Act:

Eleven Agencies' Estimates of Resources for Implementing Regulatory Reform

GAO-11-808T: Published: Jul 14, 2011. Publicly Released: Jul 14, 2011.

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This testimony provides information on selected federal agencies' reported funding and staff resources associated with implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) in 2010, 2011, and 2012. The recent financial crisis is considered to be the worst since the Great Depression, and data from the Board of Governors of the Federal Reserve System (Federal Reserve) show that it resulted in the loss of trillions of dollars in household wealth. Congress passed the Dodd-Frank Act in 2010 in response to the ongoing crisis, including in the legislation numerous provisions intended to strengthen oversight of insured depository institutions and nonbank financial companies and to consolidate consumer protection responsibilities that had been fragmented across multiple agencies. The Dodd-Frank Act also authorized the creation of new offices and agencies to implement the reforms. The extensive reforms and the need for new offices to implement them have raised questions about the potential costs to agencies of complying with the provisions. The testimony today focuses on (1) the agencies' funding estimates and the sources of funds associated with implementing the Dodd-Frank Act, (2) agencies' estimates of the number of new entities that will be created and the full-time equivalents (FTEs) they anticipate needing to carry out new responsibilities, and (3) challenges that the agencies faced in developing these estimates..

The amount of new funding the agencies reported as associated with implementing the Dodd-Frank Act varied significantly across the 11 agencies. For example, new funding resources related to Dodd- Frank responsibilities during the years 2011-2012 ranged from a low of $0 for Federal Trade Commission (FTC) to a high of around $329 million for Consumer Financial Protection Bureau (CFPB). Funding resources to implement the Dodd-Frank Act accounted for at least 25 percent of the agency's total budget increase at 9 of the 11 agencies in the most recent year for which data were available. Excluding the three agencies that the Dodd-Frank Act created (CFPB, Financial Stability Oversight Council (FSOC), and Office of Financial Research (OFR), the Commodity Futures Trading Commission (CFTC) devoted the highest share of total agency resources (25 percent) to implementing the Dodd-Frank provisions. Agencies reported that most of the costs related to implementing the provisions will be recurring. The agencies are relying on a variety of sources to fund the implementation costs for the new provisions, including assessments and revenues, appropriations, offsetting collections, and transfers from other agencies. Six of the 11 agencies reported that their funding would be fully or partly met by assessments imposed on regulated institutions or revenues from their operations. Three others reported that they would have to rely at least partly on appropriations. SEC said that it would use offsets (e.g., fees collected), and CFPB would use transfers from the Federal Reserve to fully fund its activities. Nearly all the agencies plan to have some staff work specifically on responsibilities related to the Dodd-Frank Act. Agencies can hire new staff, redirect staff from other areas, or use staff transferred from other agencies. According to data from the agencies, full-time equivalents (FTE) related to implementing the Dodd-Frank provisions for the years 2011-2012 ranged from a low of 0 for FTC to a high of 1,225 for CFPB. More specifically, FTC reported that it would implement the Dodd-Frank Act using existing resources and did not anticipate that the new requirements would have a noticeable impact on the agency's budget or operations, since its responsibilities under the Act were relatively limited. CFPB reported that all of its estimated FTEs were new hires, as the agency is currently being established. Furthermore, some agencies will be receiving staff and resources transferred from other agencies. Agencies faced numerous challenges in reporting the resources associated with implementation of the Dodd-Frank Act. Agencies told us that their reported funding and FTE resources reflect their best estimate of the level of resources required to implement existing and new responsibilities but stated that these estimates were uncertain. Beyond the normal challenges associated with estimating resource needs in the future, agencies told us that pending and evolving implementation actions, such as interagency transfers (e.g., from Office of Thrift Supervision (OTS) to Office of the Comptroller of the Currency (OCC)) and establishing new offices required by the Dodd-Frank Act, makes these estimates particularly uncertain and subject to change.

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