Rethinking Regulation: $1.5 Billion in Savings Is on the Table

For over fifty years, we’ve been debating how to fix the U.S. regulatory structure. Every proposal overlooks the one thing that could actually shake up the game: data. So let’s start there and imagine a world where we could save $1.5 billion while streamlining the chaos.

A $7.5 Billion Bureaucratic Buffet

Picture this: You’re running a company, and five managers oversee the same project. They have overlapping responsibilities, contradictory priorities, and minimal coordination. Sounds like a sitcom? Nope. It’s how the U.S. supervises banks.

We’re shelling out $7.5 billion annually across federal and state banking regulators. That’s a jaw-dropping number before you even factor in the billions banks spend complying with their mandates. Banks are caught in a web of duplicative exams, conflicting rules, and dual banking system that allows for “regulatory arbitrage” (translation: gaming the system). Oh, and for those gearing up to @ me about these programs being self-funded through bank charges and fines, guess who foots the bill in the end? Yep, you do.

How did we get here? Each agency was born out of a crisis, well-intentioned but shortsighted. Instead of evolving into an efficient machine, we’ve built a Rube Goldberg bureaucratic nightmare. The result? More waste, less oversight, and a financial system operating with the agility of a cruise ship.

Global Models vs. American Chaos

While other advanced economies have embraced consolidated regulatory structures (think: streamlined, consistent, cost-effective), the U.S. clings to its patchwork quilt. The OCC, FDIC, Federal Reserve, and state banking authorities all jockey for position like it’s a middle-school dance. The outcome? Taxpayers, banks, and regulators drowning in inefficiency and a financial system more vulnerable than it should be.

There are fewer than 10,000 financial institutions in the U.S., but closer to 25,000 points of regulatory supervision. Let that sink in. When everyone’s in charge, no one’s accountable.

The Cost of Doing Nothing

Defenders of the status quo argue that multiple agencies provide checks and balances, historical continuity, and “diverse perspectives.” Translation: they’re clinging to tradition because change is hard. But let’s be real, the costs dwarf any theoretical benefits.

Case in point: overlapping jurisdictions don’t just waste time and money; they create blind spots. Remember 2008? Poor communication between regulators let systemic risks fester. Fast forward to 2023, another crisis, another GAO report highlighting coordination failures between federal and state agencies. History doesn’t just repeat itself; it smacks us in the face.

We spend $7.5 billion annually to maintain this charade and employ over 24,000 people. That’s $307,000 per federal or state employee involved in supervision. If inefficiency were an Olympic sport, we’d be taking home the gold.

Dual Banking: Twice the Red Tape, None of the Fun

The U.S. loves to flex about its “dual banking system,” where both state and federal regulators oversee banks. Sounds fancy, but in reality, it’s regulatory competition masquerading as “choice.” Nealy every state-chartered bank or credit union is also federally regulated. So, is it really dual or just duplication by design?

Here’s a snapshot of state-level expenses: New York, California, and Oregon alone outspend entire federal agencies like the Federal Reserve and the NCUA. And yes, these numbers include money transmitter and insurance regulations, but that’s a rant for another day.

Fixing the Unfixable

Reforming U.S. financial regulation isn’t about torching the system. It’s about keeping the parts that work and ditching the dead weight. Here’s a three-step plan:

1. Consolidate Agencies: Merge duplicative regulators into two: one for prudential supervision, one for conduct. Countries like the UK and Australia have nailed this. Assuming each U.S. agency spends 20% of its budget on admin, consolidation could save $1.2 billion. Cut that overhead by three-fifths, and we’re looking at $716 million in savings without laying off a single boots-on-the-ground examiner.

   
   

2. Rethink Dual Banking: Eliminate the dual system, stripping out $750 million in redundant costs. Alternatively, let state-chartered banks and credit unions operate without federal oversight. Either way, less duplication equals more efficiency.

   
   

3. Leverage Data: Build a centralized data repository for regulators and banks. Transparency and shared information could reduce blind spots and foster accountability. (Bonus: it might even prevent the next crisis.)

   
   

Why It Matters

Financial regulation should protect consumers, stabilize markets, and drive growth. Instead, we’ve created a system so complex it distracts from these goals. Streamlining the framework could save $1.5 billion annually, ease the regulatory burden on banks, and, most importantly, make the system actually work.

The U.S. financial industry deserves a regulatory model that matches its sophistication. Right now, we’re paying a premium for inefficiency, and it’s a cost the economy can no longer afford. Let’s cut the red tape and build something that works.

P.S. Want the full breakdown, including the unpublished analytics? Hit me up... and bring your wallet.