The election results signaled that the implementation of essential financial regulations can go forward, increasing the likelihood of stable and sustained economic growth. Yet despite this fresh indication of support for curbing the excesses of Wall Street (including the election of Elizabeth Warren, the most powerful consumer advocate in the country and an insightful critic of the financial industry), the lame duck Congress may, under the public radar, act in a contrary fashion. There is some momentum to move forward legislation that would severely hamper financial regulators, over objections by leading regulators at the federal and state level, and without appropriate due diligence about the bill’s effects.
Specifically, one would hope and expect the lame duck Senate to do nothing to compromise the authority of independent agencies like the SEC and the Consumer Financial Protection Bureau as they implement the Dodd-Frank reforms of Wall Street and the financial sector. Nonetheless, as New York Times editorial writer Teresa Tritch warns, the Senate Homeland Security and Government Affairs Committee might quickly take up and approve legislation to diminish the independence of these important agencies and many others, including the Consumer Product Safety Commission and the National Labor Relations Board.
The legislation in question, S. 3468, the Independent Agency Regulatory Analysis Act, would compel every independent agency to submit its regulatory proposals to the Office of Information and Regulatory Affairs (OIRA) in the Office of Management and Budget. This would give the political appointee who heads the office in this and future administrations the ability to delay or block agency rules which the White House finds politically inconvenient, thus subverting the purpose of having made the agencies independent in the first place.
Realizing the danger OIRA review would pose to their ability to carry out their mission, the heads of six critical financial agencies, including Mary Schapiro at the SEC and Ben Bernanke at the Federal Reserve, wrote to Chairman Joe Lieberman and ranking member Susan Collins to caution them against marking up the bill. Caution is particularly called for because no hearing has been held on the proposal, and it appears no one has fully thought through its implications for the broad range of agencies to which it would apply.
The association of state securities regulators (which by its very nature is bipartisan) also sent a letter to Lieberman and Collins opposing S. 3468. They fear that OIRA’s history of delaying agency rulemakings will be repeated with the Wall Street reforms and “could have profound, chilling effects on the ability of independent regulatory agencies to adopt rules that effectively protect the investing public.” They point to OIRA’s intervention in matters such as a health standard to protect against silicosis, an egregious example of OIRA ignoring the expert knowledge that is supposed to guide rulemaking:
“In January 2012, 300 scientists, physicians and public health experts sent President Obama a letter urging him to direct OIRA to complete its review of proposed crystalline silica regulations proposed by the Occupational Hazard Safety Administration (OSHA). At that point, OIRA had already been reviewing the proposed rule for nearly a year, despite the fact that EO 12866 limits OIRA’s authority for such review to a four-month maximum. As of October, 2012, OIRA’s review of OSHA’s proposed crystalline silica rules remains pending.”
Some of S. 3468’s supporters say they are interested only in improving the economic analyses performed by the various independent agencies. That might be a worthy goal, though there is little evidence that better economic analyses would have changed rules in any significant way. But the cost in terms of lost independence, rulemaking delays, and opportunities for mischievous lobbying by regulated entities surely outweighs any benefit of potentially improved analysis, or suggests that other ways to improve such analysis should be explored.
At minimum, all these issues deserve a full assessment that the lame duck session would not provide. S. 3468 is potentially dangerous legislation that should not even begin to be considered without appropriate hearings in the Senate where experts and affected communities on both sides can present their views, and where the many agencies that would be influenced can explore the impact of the bill on their statutes and mission.