Wall Street’s Washington surrogates in Congress are attacking the Dodd-Frank reform law by claiming that bankers who are buried in new rules can’t make loans. Currently, House financial services committee Chairman Spencer Bachus (R-Ala.) dramatizes the problem: “It will take companies 20 million work hours each year to comply with just the first 224 of these 400 new rules – a figure that is especially staggering when one considers it took 20 million hours to build the Panama Canal.”
Yowza! The Panama Canal! A path between the seas, uniting Atlantic and Pacific, revolutionizing commerce, one of the greatest accomplishments in human history. That labor involved a nine-year French effort, ending in 1890, then a 10-year, US-led effort ending in 1914. At its peak, the work force numbered some 44,000.
Wait a minute: 20 million hours? A typical American works about 2,000 hours a year (40 hours a week, 50 weeks a year). Applying these relatively civilized hours to the peak employment year of 44,000 generates 88 million hours. That’s four times the Bachus number — for just one year out of the two-decade construction effort. (Given the relative dearth of labor laws at the turn of the 20th Century, it’s worth questioning whether canal laborers really went home each day after eight hours.)
As the famous palindrome goes: a man, a plan, a canal — Panama? More like a canard.
How Chairman Bachus fumbled the Panama Canal figure (which has been repeated by his colleagues, such as Rep. Randy Neugebauer, R-Texas) isn’t clear. No sources are cited on the congressional website. A web search of this figure leads to MacArthur “genius” and Carnegie Mellon University Prof. Luis von Ahn. Prof. Von Ahn deploys the Panama number in a multiple presentations, attempting to highlight what could be accomplished with millions of online computer users working together. Brilliant stuff, certainly. But the Guatamala native, who should know better, is just as certainly wrong about the labor costs of the Panama Canal. (When Public Citizen asked university officials about the Panama estimation, an official responded that the professor “doesn’t have anything else to say.”)
Does a mistake by MacArthur genius to scale the implementation of Wall Street reform excuse House Republicans? No. We should expect more. Their judgment determines critical policy. Their judgment translates into economic destiny. The housing bubble inflated when too few people asked the obvious questions, such as why home prices grew violently outside the link to rental prices. Or why AIG held no capital behind its $180 billion worth of credit default swap insurance contracts.
As in the well-worn palindrome about Panama, these House members believe going backward on reform is equivalent to going forward. In citing the minimal paperwork costs, they ignore the benefit of averting the colossal damage wrought by another financial crash.
Here are some accurate numbers that may help explain the weak estimation skills of House banking leadership: The financial sector spent $479 million in reported lobbying dollars in 2011.
If the banks simply handed this money to the 535 members of Congress, that would be nearly $1 million a year — each. Rise to vote, sir (another palindrome), such Wall Street money commands. And unfortunately, they do — apparently without checking reality.
If banks truly care to trim costs, they could curb lobbying against Wall Street reform. Wall Street certainly isn’t purchasing very good arithmetic from their members of Congress.
Bart Naylor is Public Citizen’s financial policy reform advocate. You can follow him at @BartNaylor.