Congressional Budget Office

Testimony

CONGRESSIONAL BUDGET OFFICE

SECOND AND D STREETS, S.W.

WASHINGTON, D.C. 20515

Statement of 

Douglas W. Elmendorf 

Director

Review of CBO’s Cost Estimate for the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act

before the 

Subcommittee on Oversight and Investigations

Committee on Financial Services

U.S. House of Representatives

March 30, 2011

This document is embargoed until it is delivered at 

2:00 p.m. (EDT) on Wednesday, March 30, 2011. The 

contents may not be published, transmitted, or otherwise 

communicated by any print, broadcast, or electronic 

media before that time.
Notes

Unless otherwise noted, all years referred to in this testimony are federal fiscal years, 

which run from October 1 to September 30.

The numbers in the text, table, and figure may not add up to totals because of 

rounding.
CBO

Chairman Neugebauer, Congressman Capuano, and Members of the Committee, 

thank you for inviting me to review the Congressional Budget Office’s (CBO’s) cost 

estimate for the Dodd-Frank Wall Street Reform and Consumer Protection Act 

(Public Law 111-203). My statement summarizes CBO’s cost estimate for the legislation as enacted on July 21, 2010. 

As you know, one of CBO’s primary responsibilities is to provide the Congress with 

the information and estimates required as it considers legislative proposals during the 

Congressional budget process. To that end, CBO prepared cost estimates for several 

versions of the Dodd-Frank Act. The most descriptive cost estimate, released on June 

9, 2010, was for H.R. 4173, the Restoring American Financial Stability Act, as passed 

by the Senate. Later, CBO prepared a shorter, updated cost estimate for the conference agreement on H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer 

Protection Act; that estimate was released on June 28, 2010. Finally, before the House 

passed H.R. 4173, CBO prepared a cost estimate for the conference agreement after 

an additional amendment was adopted by the conferees; that estimate was released on 

June 29, 2010. All of those cost estimates are available on CBO’s Web site.1

The Dodd-Frank Act made significant changes to the regulatory environment for 

banking and thrift institutions as well as for financial markets and their participants. 

The act expanded existing regulatory powers, granted new regulatory powers, and 

reallocated regulatory authority among several federal agencies—with the aim of 

reducing the likelihood and severity of future financial crises. The act also established 

new agencies and programs and provided grants to help communities address high 

foreclosure rates and subsidies to assist homeowners facing foreclosure. 

CBO estimated that, over the 2010–2020 period, the Dodd-Frank Act would increase 

both revenues and direct (or mandatory) spending—by $13.4 billion and $10.2 billion, respectively. On net, those effects were projected to reduce deficits by 

$3.2 billion (see Table 1). The revenues would stem primarily from fees assessed on 

various financial institutions and market participants. Certain provisions of the act 

were estimated to increase direct spending by $37.8 billion over the 10-year period; 

most of those costs, $26.3 billion, would result from a new program created to resolve 

insolvent or soon-to-be insolvent financial entities, which would be financed through 

an Orderly Liquidation Fund (OLF). CBO also estimated that other provisions of the 

act would reduce direct spending by $27.6 billion over that period by decreasing 

authority for the Troubled Asset Relief Program (TARP) and making changes to federal deposit insurance programs (see Figure 1 on page 4). 

1. See Congressional Budget Office, “CBO Estimate of the Net Deficit Effects of H.R. 4173, the 

Dodd-Frank Wall Street Reform and Consumer Protection Act” (June 29, 2010); cost estimate for 

H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act (June 28, 2010); 

and cost estimate for H.R. 4173, the Restoring American Financial Stability Act of 2010 (June 9, 

2010).
2

CBO

Table 1.

CBO’s Estimate of the Impact on Budget Deficits Over the 

2010–2020 Period From Enacting the Dodd-Frank 

Wall Street Reform and Consumer Protection Act

(Billions of dollars)

Continued

Cost of New Federal Organizations (CFPB, FSOC, OFR, ONI)

Estimated outlays 6.8 *

Estimated revenues 0.5

Net Change in Deficits 6.3

Changes to the Existing Regulatory Structure

(CFTC, FDIC, Federal Reserve, OCC, PCAOB, SEC, SIPC)

Estimated outlays 2.7 0.3

Estimated revenues 2.6

Net Change in Deficits 0.1

Additional Funding for Existing Programsa

Estimated outlays 1.5 0.2

Estimated revenues 0

Net Change in Deficits 1.5

Changes to Federal Deposit Insurance

Estimated outlays 0 0

Estimated offsets to outlays -16.6

Estimated revenues 0

Net Change in Deficits -16.6

Orderly Liquidation Fund

Estimated outlays 26.3 0

Estimated revenues 6.0

Net Change in Deficits 20.3

Troubled Asset Relief Program

Estimated offsets to outlays -11.0 0

Net Change in Deficits -11.0

Other Budgetary Effectsb

Estimated outlays 0.5 2.1

Estimated revenues 4.3

Net Change in Deficits -3.8

(2010–2020)

Direct

(2010–2015)

Discretionary
3

CBO

Table 1. Continued

CBO’s Estimate of the Impact on Budget Deficits Over the 

2010–2020 Period From Enacting the Dodd-Frank Wall 

Street Reform and Consumer Protection Act

(Billions of dollars)

Source: Congressional Budget Office.

Notes: Components may not sum to totals because of rounding.

For the changes in deficits, positive numbers represent an increase in deficits and negative 

numbers represent a decrease in deficits.

CFPB = Consumer Financial Protection Bureau; FSOC = Financial Stability Oversight 

Council; OFR = Office of Financial Research; ONI = Office of National Insurance; CFTC = 

Commodity Futures Trading Commission; FDIC = Federal Deposit Insurance Corporation; 

OCC = Office of the Comptroller of the Currency; PCAOB = Public Company Accounting 

Oversight Board; SEC = Securities and Exchange Commission; SIPC = Securities Investor 

Protection Corporation.

* = less than $50 million.

a. The Dodd-Frank Act provided funding for subsidies to help homeowners in foreclosure and for 

grants to stabilize communities with many foreclosed properties.

b. The Dodd-Frank Act provided the Securities and Exchange Commission with permanent 

authority to collect certain fees and to spend a limited amount of those collections; adjusted 

the regulation of fixed income annuities; exempted swaps and other derivatives from certain 

provisions of the Internal Revenue Code; and authorized funding for counseling and legal 

assistance programs for certain homeowners and tenants.

In addition to those changes in direct spending and revenues, CBO estimates that the 

Dodd-Frank Act will lead to an increase of $2.6 billion in discretionary spending over 

the five-year period ending in fiscal year 2015, assuming that the Congress provides 

the necessary appropriations in the future.2

 In CBO’s cost estimates, the effects of legislation on discretionary spending are shown separately from the effects on direct 

spending and revenues because the former occur only if funding is provided in future 

appropriation acts.

2. CBO did not include an estimate of the effect on discretionary spending in the cost estimates 

released on June 28, 2010, and June 29, 2010, because the agency was unable to complete such an 

estimate before the legislation was scheduled to be considered in the House of Representatives. On 

the basis of analyses prepared for a previous version of the act, S. 3217, the Restoring American 

Financial Stability Act of 2010, as ordered reported by the Senate Committee on Banking, 

Housing, and Urban Affairs, and for H.R. 1728, the Mortgage Reform and Anti-Predatory Lending Act, as ordered reported by the House Committee on Financial Services, CBO estimates that 

the discretionary provisions of H.R. 4173 as enacted will cost $2.6 billion over the 2011–2015 

period, if the necessary funds are provided in appropriation acts.

Total Effect on Deficits

Estimated outlays 37.8 2.6

Estimated offsets to outlays -27.6

Estimated revenues 13.4

Net Change in Deficits -3.2

(2010–2020) (2010–2015)

Direct Discretionary
4

CBO

Figure 1.

CBO’s Estimate of the Effects on Direct Spending and 

Revenues of the Dodd-Frank Wall Street Reform and 

Consumer Protection Act Over the 2010–2020 Period

Source: Congressional Budget Office.

Note: OLF = Orderly Liquidation Fund; TARP = Troubled Asset Relief Program.

CBO’s Role in the Legislative Process

Before providing you with details on CBO’s cost estimate, I would like to give a brief 

overview of the agency’s role in the legislative process.

One of the agency’s chief responsibilities is to provide information that helps the 

Budget Committees enforce the budgetary rules established by law or adopted by each 

House. CBO nearly always provides formal estimates for bills that are reported out of 

committee, but it also often provides the Congress with estimates of the cost of bills at 

other stages as they proceed from consideration by the relevant committees through 

passage. (The estimated impact of most legislation on revenues is determined by the 

staff of the Joint Committee on Taxation [JCT]. CBO uses estimates provided by 

JCT in its cost estimates.) During the 111th Congress, CBO prepared 1,137 formal 

estimates, primarily for legislation reported by authorizing committees. 

A CBO cost estimate typically includes information about the budgetary effects of a 

bill in two broad categories: budget items that are subject to the pay-as-you-go rules 

OLF

$26.3 billion

All Other

Spending

$11.5 billion

Deposit

Insurance

$16.6 billion

TARP

$11.0 billion

OLF

$6.0 billion

Federal

Reserve

$1.8 billion

Other Fees

$5.6 billion $3.2 Billion

Total Increases in

Spending

$37.8 billion

Total Decreases in

Spending

$27.6 billion

Total Increases in

Revenues

$13.4 billion

Deficit Reduction

$3.2 billion

– –=
5

CBO

(that is, direct spending and revenues), which are shown for the current year and the 

following 10 years; and separately, discretionary spending, which is subject to future 

action in appropriation bills and is usually shown for the current year and the following five years. In addition, a CBO estimate typically includes a statement about the 

bill’s effect on state, local, and tribal governments and on the private sector. For the 

Dodd-Frank Act, CBO and JCT completed seven formal cost estimates for different 

versions of the consolidated bill and nine cost estimates for other bills that included 

specific provisions of the consolidated bill and that were marked up separately by the 

Committee on Financial Services and other committees (see the Appendix). Prior to 

and during deliberations on the bill, CBO provided many informal estimates as the 

authors were drafting various provisions of the legislation—a long-standing practice 

of the agency to assist committees and sponsors as they develop legislative language.

Once proposed legislation is enacted, however, the agency’s involvement is quite limited. New statutes join with the whole body of existing law to form the basis for 

CBO’s baseline projections. Those projections are generally prepared for programs as 

a whole; therefore, the effects of individual statutes cannot ordinarily be separately 

identified. The agency generally revisits a specific law again only if the Congress considers new legislation to amend it.

Major Provisions of the Dodd-Frank Act and Their 

Budgetary Effects

The Dodd-Frank Act significantly changed the way the federal government regulates 

entities and transactions associated with the financial markets. Specifically, the act did 

the following (with the resulting net additions to or reductions in federal deficits 

from changes in direct spending and revenues over the 2010–2020 period shown in 

parentheses):

B Created several new federal organizations to regulate financial matters: the Consumer Financial Protection Bureau (CFPB), the Financial Stability Oversight 

Council (FSOC), the Office of Financial Research (OFR), and the Office of 

National Insurance ($6.3 billion);

B Restructured the authority of existing financial regulators, including the Office of 

the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve System, the Securities 

and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC) ($0.1 billion);

B Provided additional funding for existing programs that provide mortgage relief, 

neighborhood revitalization, and grants to encourage individuals to move from 

nonbank financial services to traditional banks ($1.5 billion);
6

CBO

B Modified federal deposit insurance programs, including increasing the maximum 

amount of deposits in an individual account that can be insured and directing the 

FDIC to increase the size of its insurance fund by 2020 (-$16.6 billion);

B Created the Orderly Liquidation Fund and authorized the FDIC to resolve 

systemically important financial firms under certain conditions ($20.3 billion); 

B Reduced the spending authority of the TARP (-$11.0 billion); and 

B Made a number of other changes to current law, including reclassifying the budgetary treatment of certain fees collected by the SEC, modifying the regulation of 

certain types of tax-deferred annuities, and authorizing grants to provide counseling and legal assistance to homeowners facing foreclosure (-$3.8 billion).

The remainder of this testimony discusses CBO’s cost estimate in more detail.

Cost of New Federal Organizations

The Dodd-Frank Act established several new regulatory entities, including the Consumer Financial Protection Bureau, the Financial Stability Oversight Council, the 

Office of Financial Research, and the Office of National Insurance. 

The CFPB is an autonomous agency funded by transfers from the Federal Reserve, 

which is a self-financing governmental entity. CBO estimated that the cost for the 

CFPB over the 10-year period would be $5.9 billion. Of that amount, about $1.2 billion represents costs for activities previously performed by the Federal Reserve that are 

being transferred to the CFPB under the act. 

How will those costs appear in the budget? Each year, the Federal Reserve determines 

the amount of its income that exceeds its operating costs and transfers most of that 

amount to the Treasury. Those Treasury receipts are recorded in the budget as revenues. If the Federal Reserve’s costs increase and its income is unchanged, it transfers 

less to the Treasury, decreasing the amount of revenues recorded in the federal budget. 

One option for presenting the budgetary effects of this action is to record the funds 

provided by the Federal Reserve to the CFPB as reductions in revenues because they 

will reduce the Federal Reserve’s transfers to the Treasury. In CBO’s estimate, however, 

the costs of the CFPB were classified as additional direct spending, from the standpoint that such information would more accurately reflect the true nature of the 

transactions. (The Office of Management and Budget reached the same conclusion: 

The President’s budget for fiscal year 2012 presents the costs of the CFPB as spending 

in a new budget account.) Either approach, however, arrives at the same end: Spending by the CFPB represents an increase in budget deficits.

The FSOC and the OFR also will be funded by transfers from the Federal Reserve, 

but only for the first two years after enactment; after that, they will be supported 

by fees assessed on certain financial companies. As was the case with the CFPB, 

CBO categorized the costs for those new entities as additional direct spending and 
7

CBO

estimated that those costs would total $900 million over the 2011–2020 period. That 

amount includes the general operating costs of the two new entities and the cost of a 

provision allowing the OFR to enter into certain lease agreements. CBO estimated 

that fee collections to offset the costs of the FSOC and the OFR would total about 

$500 million over the same period, assuming that fees would not be assessed to cover 

the OFR’s leasing and construction costs. Those collections would be counted as 

revenues.

Finally, the act established the Office of National Insurance at the Department of the 

Treasury. CBO estimates that this new office will cost less than $20 million over the 

2011–2020 period, assuming appropriation of the necessary funds.

All told, CBO estimated, establishing the CFPB, FSOC, and OFR would, on net, 

increase budget deficits by $6.3 billion over the 10-year period. That amount does 

not reflect savings for the Federal Reserve, which I will discuss later.

Changes to the Existing Regulatory Structure

The act changed the regulatory regime for financial activities by rearranging the 

responsibilities of federal banking regulators and by broadening the authority of the 

agencies that oversee financial markets. CBO estimated that—through their effects on 

direct spending and revenues—provisions making changes to existing regulatory 

agencies would increase deficits by $0.1 billion, on net, over the 2011–2020 period. 

Those changes were expected to add about $2.7 billion in spending, most of which 

would be offset by additional revenues totaling $2.6 billion. The spending would 

consist of additional outlays for the SEC, the CFTC, bank regulators, the Public 

Company Accounting Oversight Board (PCAOB), and the Securities Investor Protection Corporation (SIPC). Of the total revenue amount, about $0.8 billion would 

result from fees collected by the PCAOB and the SIPC; the balance, about $1.8 billion, represents additional revenues generated by the Federal Reserve from new fees 

required by the act ($0.6 billion) and from the increase in its net income that would 

result from the transfer of personnel to the CFPB ($1.2 billion). In addition, CBO 

estimates that the SEC and CFTC will incur additional net discretionary costs of 

$0.3 million over the 2011–2015 period, assuming future appropriation of those 

funds.

Financial Market Regulators. The act established programs at the SEC and CFTC 

to reimburse individuals who provide information that leads to successful prosecution 

of violations of securities and derivatives regulations. CBO estimated that the whistleblower provisions would add $1.1 billion to direct spending over the 2011–2020 

period. 

Further, the act expanded the authority of the SEC and CFTC to regulate entities and 

transactions associated with registered financial markets. Both agencies receive funding annually through the appropriation process. CBO estimates that changes to the 

regulatory authority of those agencies (not including the authority to compensate 

whistleblowers) will increase discretionary spending by $1.3 billion, under an assumption that the added spending authority will be provided in appropriation acts. That 
8

CBO

amount will be partly offset by discretionary fees totaling about $1.0 billion to be collected by the SEC if the authority to collect those fees is provided in appropriation 

acts. Therefore, CBO estimates that the net discretionary cost of those provisions will 

total about $300 million over the five-year period ending in 2015.

Federal Bank and Thrift Regulators. The act abolished the Office of Thrift Supervision (OTS), transferring its functions to other regulators, including the Office of 

the Comptroller of the Currency, the FDIC, and the Federal Reserve. CBO estimated 

that, excluding the effects on the Federal Reserve, those provisions would increase 

budget deficits by $0.3 billion over the 2011–2020 period because of provisions that 

allow the OTS to spend unobligated balances for the transition and that authorize the 

OCC to enter into agreements without regard to existing laws governing the disposition of real or personal property. 

The Federal Reserve. The act also broadened the authority of the Federal Reserve to 

include the supervision and examination of thrift holding companies—activities previously overseen by the OTS. The act requires the Federal Reserve to charge fees for 

the examination of large thrift and bank holding companies but not for the examination of smaller thrift holding companies. CBO estimated that the net effect of those 

changes to the Federal Reserve’s regulatory structure would be an increase in revenues 

of about $580 million over the 10-year period. The fees that large bank holding companies will pay account for most of the projected revenue increase, because the Federal 

Reserve did not previously charge fees for its examinations of bank holding companies 

and the new fees will represent reimbursements for costs the Federal Reserve would 

have incurred under prior law. The fees that large thrift holding companies will pay 

will compensate the Federal Reserve for the additional costs of their supervision and 

examination, resulting in no net impact on revenues. The examination and supervision of smaller thrift holding companies represent additional costs to the Federal 

Reserve, which will partially offset the income from the fees paid by large bank holding companies.

Additionally, the Federal Reserve will transfer personnel and consumer-protection 

functions to the Consumer Financial Protection Bureau. CBO estimated that more 

than 500 positions would be transferred to the CFPB, raising revenues by about 

$1.2 billion over the 2011–2020 period by reducing costs to the Federal Reserve by 

the same amount.

The Federal Reserve also will incur additional costs, which CBO estimated would 

total $50 million over the 10-year period, for the following additional duties required 

by the act:

B Supervision of certain securities holding companies;

B Additional joint rulemaking responsibilities; and

B Supervision of financial market utilities.3

3. A financial market utility is an organization that transfers, clears, or settles payments, securities, or

other financial transactions among financial institutions. 
9

CBO

Other Financial Regulators. The act also expanded the oversight authority of the 

PCAOB and increased the amounts the SIPC can borrow from the Treasury. Both 

agencies charge fees to offset operating costs. CBO estimated that these provisions 

would increase direct spending by $1.3 billion and revenues from additional fees by 

$0.8 billion over the 2011–2020 period.

Additional Funding for Existing Programs

The Dodd-Frank Act appropriated funds for grants to state and local governments to 

purchase and redevelop abandoned properties and for subsidies to provide mortgage 

relief to certain homeowners. CBO estimated that these provisions would increase 

direct spending by $1.5 billion over the 2011–2020 period. 

The act also authorized funding that will be subject to future appropriation action for 

a program to encourage consumers to use traditional banking services rather than 

alternative financial services, such as nonbank check cashing and payday lending. 

CBO estimates that the added discretionary spending will amount to about 

$200 million over the five-year period ending in 2015, assuming appropriation of the 

necessary funds.

Changes to Federal Deposit Insurance

The Dodd-Frank Act made several changes to federal deposit insurance programs. 

CBO estimated that those provisions would reduce net outlays by $16.6 billion over 

the 2011–2020 period. 

Over half of the estimated savings—about $9 billion—will result from provisions that 

permanently increased the maximum amount of insured deposits for individual 

accounts (from $100,000 to $250,000). Raising the level of deposit insurance coverage will reduce federal outlays because of the way those programs are funded. By law, 

the FDIC and the National Credit Union Administration (NCUA) are required to 

maintain balances in their insurance funds equivalent to a specified percentage of 

insured deposits. Thus, increasing the volume of insured deposits will require a corresponding increase in the size of the insurance funds, which will require an increase in 

premiums paid by depository institutions. Those premiums are recorded as collections to the FDIC’s Deposit Insurance Fund (DIF) and the NCUA’s Share Insurance 

Fund and offset direct spending.

CBO’s cost estimate also included savings of nearly $6 billion resulting from provisions that directed the FDIC to increase the size of the Deposit Insurance Fund by 

2020. Before the enactment of the Dodd-Frank Act, the FDIC was charging premiums at rates necessary to have DIF balances equivalent to about 1.25 percent of 

insured deposits by the end of the decade. The act established a higher target for 

2020, requiring DIF balances equivalent to 1.35 percent of insured deposits. 

Increasing the size of the DIF by 2020 will reduce the FDIC’s net outlays as depository institutions pay higher premiums to increase the capitalization of the fund.

Finally, the act repealed the FDIC’s authority to guarantee certain types of debt unless 

specifically authorized by future legislation. In 2008, the FDIC established a temporary program to guarantee certain obligations of insured depository institutions, 
10

CBO

holding companies that include insured depository institutions, and some affiliates 

of those firms. The Dodd-Frank Act repealed the FDIC’s prior authority for such 

assistance and provided a new framework for similar, but potentially much broader, 

assistance. Use of those new authorities, however, would be contingent on the enactment of subsequent legislation. As a result, the estimated budgetary impact of 

enacting those provisions reflects the effects of eliminating the FDIC’s prior authority 

but does not include the estimated cost of the new program. CBO estimated that this 

change would reduce net direct spending by the FDIC by about $2 billion over the 

2011–2020 period. 

Orderly Liquidation Fund 

The Dodd-Frank Act provided new authority for the federal government to liquidate 

large, systemically important firms that become insolvent or are in danger of becoming insolvent. Firms will be considered systemically important if their failure is determined to threaten the stability of the nation’s financial system. Under the act, the 

FDIC is authorized to borrow funds from the Treasury to liquidate such firms and to 

levy fees on large bank holding companies and other financial firms to cover any 

losses; those transactions would occur through the Orderly Liquidation Fund. 

If those authorities were invoked, the transactions would be recorded in the budget on 

a cash basis. Spending for resolution activities would increase outlays in the initial 

years of a liquidation, but that spending would be offset in subsequent years by 

income received from selling the assets of the failed firm and collecting fees to cover 

any losses. As a result, a snapshot of cash flows in any given 10-year budget window is 

unlikely to net to zero because the spending to liquidate a firm would occur before the 

income was received to cover those costs. 

CBO’s estimate of the cost of the resolution authorities provided by the act represents 

the difference between the expected values of the net costs to the OLF to resolve 

insolvent firms and the additional assessments collected by the OLF. Those expected 

values represent weighted averages of the outcomes of various scenarios regarding the 

frequency and magnitude of systemic financial problems, taking into account an 

estimated probability of each scenario. Although the estimate reflects CBO’s best 

judgment on the basis of historical experience, the cost of the program will depend 

on future economic and financial events that are inherently unpredictable. Moreover, 

the timing of the cash flows associated with resolving insolvent firms is also difficult 

to predict. It might take several years, for example, to recoup the funds spent to liquidate a complex financial institution. As a result, for a liquidation occurring in the 

2011–2020 period, some of the proceeds from selling assets acquired in the liquidation process or from cost-recovery fees might be collected beyond that period. 

Although the probability that the federal government would have to liquidate a 

financial institution in any year is small, the potential costs of liquidating a systemically important firm could be large. On an expected-value basis, CBO estimated 

that net direct spending for potential liquidation activities, which includes recoveries 

from the sale of assets acquired from liquidated institutions but excludes revenues 

from assessments, would be $26.3 billion through 2020. CBO estimated that the 

expected value of revenues from assessments paid to cover any losses would total 
11

CBO

about $6.0 billion through 2020, net of effects on payroll and income taxes. Because 

liquidation activities are so unpredictable, actual spending and assessments in each 

year would probably vary significantly from the estimated amounts—either higher or 

lower than the estimate provided.

Troubled Asset Relief Program

The Dodd-Frank Act also prohibited the Treasury from incurring new obligations 

under the Troubled Asset Relief Program after June 25, 2010. On the basis of several 

factors—the acceleration of the expiration date for the program, the amount of 

money that CBO had previously projected would be used for new purposes, and 

the subsidy costs for other initiatives under the TARP—CBO estimated savings of 

$11.0 billion in 2010 from the legislation.4

Other Budgetary Effects

Several other provisions of the Dodd-Frank Act will also have significant budgetary 

effects in CBO’s estimation:

B The act provided the SEC permanent authority, starting in 2012, to collect certain 

fees and spend a small portion of the receipts, thus changing the budgetary classification of those fees. (They currently make up a portion of the fees collected by the 

SEC under authority provided annually in an appropriation act. Prior to enactment of the Dodd-Frank Act, all fees collected by the SEC were authorized annually in an appropriation act and were netted against discretionary spending.) The 

act also lowered the amount of those fees that the SEC would be required to collect 

each year. With the SEC’s new authority, the affected fees will be recorded as revenues rather than as offsets to discretionary spending; nonetheless, over two-thirds 

of the fees collected by the SEC will remain discretionary. CBO estimates that this 

provision will increase revenues by $5.2 billion and increase direct spending by 

$0.5 billion over the 2011–2020 period. CBO estimates that, if the necessary 

funding is provided in future appropriation acts, this provision will increase discretionary spending by $5.6 billion over the 10-year period (including $1.9 billion 

over the first five years) because fewer collections will be available to offset discretionary appropriations.

B Several other provisions will also affect revenues. Specifically, one provision 

exempts certain derivative contracts from the effects of certain provisions of the 

Internal Revenue Code; JCT estimated that this provision would increase revenues 

by $0.1 billion over the 10-year period. Another provision exempts certain annuities from regulation by the SEC, leaving regulation of those investment vehicles 

to the states. CBO estimated that that provision would reduce revenues by about 

$1.0 billion over the 10-year period because more income would be earned from 

tax-deferred annuities rather than from taxable instruments. CBO and JCT estimated that, taken together, these provisions would increase budget deficits by 

$0.9 billion over the 2011–2020 period.

4. CBO values the TARP’s asset purchases and guarantees using procedures similar to those specified 

in the Federal Credit Reform Act of 1990, but with an adjustment for market risk as directed by 

section 123 of the Emergency Economic Stabilization Act of 2008.
12

CBO

B Other provisions of the act established programs to support efforts to provide 

homeownership counseling and legal assistance to certain homeowners and tenants. Assuming appropriation of the necessary amounts, CBO estimates that those 

programs will increase discretionary spending by $200 million over the 2011–2015 

period.

Uncertainty in CBO’s Estimates

CBO’s estimates of the costs of different provisions of the Dodd-Frank Act involve 

different degrees of uncertainty. For example, estimates of the costs of provisions that 

specify amounts of spending or that direct agencies to do more of an activity already 

being performed under current law tend to have relatively low degrees of uncertainty. 

In contrast, estimates of the costs of provisions that require federal agencies to carry 

out activities with a broad range of possible outcomes, such as the provision requiring 

the creation of the OLF, are highly uncertain. 

Under the legislation, as under prior law, there is some probability that, at some point 

in the future, large financial firms will become insolvent and a liquidity crisis will 

arise, and that those financial problems will present significant risks to the nation’s 

broader economy. The cost of addressing those problems under prior law is unknown 

and would have depended on how the Administration and the Congress chose to proceed when faced with the prospect of a financial crisis; they could, for example, have 

changed laws, created new programs, appropriated additional funds, and assessed new 

fees. Depending on the effectiveness of the new regulatory initiatives and new authorities to resolve and support a broad variety of financial institutions, implementing the 

Dodd-Frank Act could change the timing, severity, and federal cost of averting and 

resolving future financial crises. However, CBO did not attempt to determine 

whether the estimated costs under the act would be smaller or larger than the costs of 

alternative approaches to addressing future financial crises and the risks such crises 

pose to the economy as a whole.

The Administration’s Implementation of the 

Dodd-Frank Act

CBO has just issued its Preliminary Analysis of the President’s Budget for 2012. In preparing its analysis of the budget, the agency gleaned no information that would cause 

it to significantly change the cost estimate that it provided prior to the enactment of 

the Dodd-Frank Act. From the budget justifications for the SEC and the CFTC, 

CBO learned that those agencies are deeply involved in implementing the numerous 

rules that are required under the legislation. The President’s budget also provided 

information regarding expected staffing levels for the Consumer Financial Protection 

Bureau and the financial regulatory agencies. 

In cost estimates for earlier versions of the act, CBO discussed expected staffing levels 

and overhead costs. Those estimates were based on information from the affected 
13

CBO

agencies as well as from a review of historical spending patterns for similar, though 

unrelated, activities. It is not possible to assess the accuracy of CBO’s overall estimate 

of the effects of the Dodd-Frank Act on spending and revenues by evaluating the various agencies’ 2012 budget requests and plans because the full costs of implementation will not be realized for several more years. CBO can, however, provide a few 

snapshots of what it has learned so far:

B CBO estimated outlays of $167 million in 2012 for the Consumer Financial Protection Bureau; the President’s plan calls for spending $267 million that year.

B CBO estimated that about 500 people would transfer from the Federal Reserve to 

the Consumer Financial Protection Bureau; it now appears that the number of 

individuals who will transfer might be significantly smaller.

B CBO estimated that the FDIC would spend an additional $40 million in 2011 to 

implement the act, net of transfers from the OTS; actual spending this year appears 

to be in that vicinity. In addition, CBO estimated that the FDIC would collect 

$140 million in additional assessments in 2012 as a result of the act; however, the 

agency does not anticipate increasing assessments until later in the 10-year period.

B CBO estimated that the SEC would fill an additional 800 staff positions over 

several years if the necessary amounts were appropriated; the agency requested an 

additional 352 positions in 2012 to start implementing the act.

B CBO estimated that the CFTC would ultimately fill an additional 235 full-time 

staff positions if the necessary amounts were appropriated; the agency requested an 

additional 238 positions in 2012 to begin implementation of the act.

CBO

Appendix:

List of Estimates Completed for Provisions 

Incorporated in the Dodd-Frank Act

1. H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act

Estimate prepared: June 29, 2010

www.cbo.gov/ftpdocs/116xx/doc11601/hr4173amendment.pdf

2. H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act

Estimate prepared: June 28, 2010

www.cbo.gov/ftpdocs/115xx/doc11596/hr4173.pdf

3. H.R. 4173, the Restoring American Financial Stability Act of 2010

Estimate prepared: June 9, 2010

www.cbo.gov/ftpdocs/115xx/doc11560/hr4173senatepassed.pdf

4. H.R. 3817, the Investor Protection Act of 2009

Estimate prepared: June 8, 2010

www.cbo.gov/ftpdocs/115xx/doc11558/hr3817.pdf

5. S. 3217, the Restoring American Financial Stability Act of 2010

Estimate prepared: May 3, 2010

http://www.cbo.gov/ftpdocs/114xx/doc11476/s3217amendmt.pdf

6. S. 3217, the Restoring American Financial Stability Act of 2010

Estimate prepared: April 21, 2010

www.cbo.gov/ftpdocs/114xx/doc11454/s3217.pdf

7. H.R. 2609, the Federal Insurance Office Act of 2009

Estimate prepared: March 11, 2010

www.cbo.gov/ftpdocs/113xx/doc11339/hr2609.pdf

8. H.R. 4173, the Wall Street Reform and Consumer Protection Act of 2009

Estimate prepared: December 9, 2009

www.cbo.gov/ftpdocs/109xx/doc10996/hr4173rules.pdf

9. H.R. 4173, the Wall Street Reform and Consumer Protection Act of 2009

Estimate prepared: December 4, 2009 

www.cbo.gov/ftpdocs/108xx/doc10826/hr4173.pdf
16

CBO

10. H.R. 3890, the Accountability and Transparency in Rating Agencies Act

Estimate prepared: December 3, 2009

www.cbo.gov/ftpdocs/108xx/doc10833/hr3890.pdf

11. H.R. 3818, the Private Fund Investment Advisers Registration Act of 2009

Estimate prepared: November 13, 2009

www.cbo.gov/ftpdocs/107xx/doc10727/hr3818.pdf

12. H.R. 3795, the Derivatives Markets Transparency and Accountability Act of 2009

Estimate prepared: November 6, 2009

www.cbo.gov/ftpdocs/107xx/doc10717/hr3795ag.pdf

13. H.R. 3126, the Consumer Financial Protection Agency Act of 2009

Estimate prepared: November 3, 2009

www.cbo.gov/ftpdocs/108xx/doc10830/hr3126.pdf

14. H.R. 3795, the Over-the-Counter Derivatives Markets Act of 2009

Estimate prepared: November 3, 2009

www.cbo.gov/ftpdocs/107xx/doc10703/hr3795hfs.pdf

15. H.R. 3269, the Corporate and Financial Institution Compensation Fairness Act 

of 2009

Estimate prepared: July 30, 2009

www.cbo.gov/ftpdocs/104xx/doc10490/hr3269.pdf

16. H.R. 977, the Derivatives Markets Transparency and Accountability Act of 2009

Estimate prepared: February 23, 2009

www.cbo.gov/ftpdocs/100xx/doc10006/hr977.pdf