Over at Wonkblog they ask whether Dodd Frank has worked or is working in its reform of the financial system. Looking at the one part of it that I actually know something about I would have to say that no, it isn't. It's a ghastly and horribly wasteful system of doing nothing very much.
I refer, specifically, to the conflict mineral provisions: something that the Wonkblog responders don't address at all.
These specific provisions were, you might recall, meant to stop people using minerals from mines run by bloodthirsty and enslaving militias in the Congo and similar areas. A just and righteous goal of course. But the way that the rules have been designed it's a near fatuous way of addressing this specific problem.
You can have a look here at a PWC report detailing the sort of work that companies are having to undertake to perform as the rules say they must. Or how about this from the SEC itself?
The SEC in August enacted a rule that is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, P.L. 111-203, and represents an unusual attempt to curtail human rights abuses in Africa through regulation of U.S. public companies.
The SEC estimates that 6,000 U.S. issuers will be directly affected by the new requirement to trace the conflict minerals (gold, tantalum, tin, and tungsten) in their supply chains. The SEC has estimated initial compliance costs of $3 billion to $4 billion as end users of the four conflict minerals attempt to find out whether their raw materials originated at mines run by warlords in the Democratic Republic of the Congo (DRC) or its nine adjoining neighbors (Angola, Burundi, Central African Republic, the Republic of the Congo, Rwanda, South Sudan, Tanzania, Uganda, and Zambia). For companies required to file them, the first Conflict Minerals Reports are due to the SEC on May 31, 2014, to report on the 2013 calendar year.
Three to four billion? We could have sent in the Second Airborne and entirely solved the problem for less than that. Or we could have done what I was urging all along: simply concentrated our efforts at the processors. The guys at BGR (roughly, the German equivalent of the USGS) have developed a series of "fingerprints" of the minerals under discussion. Tantalite (or scheelite, wolframite, cassiterite, the major minerals under discussion) are all slightly different in their contents of trace metals, dependent upon their source mine. If you have something that's wolframite, with 2,400 ppm Sc, 100 ppm Zr (made up numbers, but indicative) and 10,000 ppm Sn then you know that this comes from the eastern end of the Erzgebirge in Germany. Scheelite with 3,000 ppm Sc comes from the Krusny Hory and so on.
Once you've got this database all you need to do is analyse the minerals when they come to the processing plants. There's maybe 10 worldwide for tantalite/columbite, 20 perhaps for wolframite and scheelite and possibly 40 for cassiterite. And those minerals will be tested anyway: they have to be, you check what they are before loading them into your very expensive plant. And that's it: you then reject anything that has a fingerprint indicating it came from a mine where they're employing child labour or whatever else it is you want to stop. The marginal costs of this are perhaps $500 or so per shipment of ore: for that's what the extra costs of testing the mineral samples to look for the trace elements would be, over and above the testing that will already naturally being done. In fact, that $500 is an over estimate.
But instead of this simple and cheap system we've got Dodd Frank which is to cost between $3 and $4 billion just to set up. Oh, and when the Enough Project first launched this idea they were talking about costs of 1 cent per mobile phone. Or perhaps $10 million a year globally.
Forgive me but no, I don't think Dodd Frank is working on conflict minerals. It's a grossly expensive manner of doing something that could have been done better and cheaper.
