Thursday, March 5, 2015

Death by A Thousand Cuts

A few years ago, I wrote a post for this blog titled, Death by A Thousand Cuts which highlighted the proliferation regulations on the mortgage industry that were shuttering thousands of small companies and forcing independent loan originators to work for bigger companies.

For over five years we have seen more and more regulation crush American business.  In the mortgage industry, this really started with the "new" good faith estimates in 2010--which now are about to be completely revised again just five years later--and the compensation rules of 2011.  But when the Dodd Frank Act was passed in 2010, it created a framework on which to hang endless regulations for all types of financial service companies.  In November of 2013, even the proponents of Dodd Frank (the NY Times) were reported that the law was creating 42 words of regulation for each word of text.  And we have been told repeatedly by Massachusetts Senator Elizabeth Warren and her socialist cohorts that these regulations are necessary to protect consumers and keep the economy safe from another crash.

I was surprised, therefore, to see someone else using the "death by a thousand cuts" analogy today.  This is not a fellow financial services professional, or a blogger, or even a conservative politician.  Today the individual speaking out against over regulation of the financial services industry is none other than the SEC commission Daniel Gallagher. 

Gallagher is not pulling any punches about the costly and negative impact of the excessive regulation on financial service firms.  To make his point, he has created a startling graphic to demonstrate the impact of regulations on financial service firms since 2010. 

To see a bigger version of this picture click here

Gallagher is very frank about the impact of over regulation and the real cost of regulatory burdens.   "No regulator, as far as I know, has considered the overall regulatory burden on financial services firms when determining whether to impose additional costly regulations," Gallagher told Mortgage Professional America. "We as regulators are, when it comes to the possibility that our rules are causing death by a thousand cuts, the proverbial ostrich—head firmly entrenched in the sand."

MPA goes on to quote Gallagher, "The stakes here are considerable: regulatory burdens divert capital away from the real economy—this acts as a barrier to entry for new market participants and further entrenches those institutions that are increasingly 'too big to fail.'"  

Gallagher says that he had his staff create the graphic to help the public understand the real impact of rule making over the last 4.5 years adding that he hopes it can spark public debate on the very serious issue of over-regulation and its impact on all of us.

Every once in a while, a federal regulator gets it right.  I applaud Gallagher for raising this issue and illustrating it so profoundly.  I hope that the country will wake up to what is happening in our country.

Alexandra Swann is the author of No Regrets: How Homeschooling Earned me a Master's Degree at Age Sixteen and several other books. Her novel, The Planner about an out of control, environmentally-driven federal government, is available on Kindle and in paperback. For more information, visit her website at

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