GOP’s Final Attempt to Obstruct the Financial Reform Bill: Freeze All Regulations
It seems like every couple days or so, House Republican Minority Leader John Boehner tries to lay down another brick as he builds a Potemkin village around the GOP. As I am sure you know, the Senate passed the final version of the financial regulation overhaul bill previously passed by the House; President Obama is expected to sign it next week. What you may not realize is that law, plus the health care law passed over the summer, not to mention many of the new laws passed in recent years require federal regulatory agencies to flesh out and write the rules that enforce the laws. Without the regulatory rules, the laws cannot be enforced. So seeing as how the GOP opposed both the new health care law and the financial regulation bill, Boehner has decided the best way to stop it is to freeze, for one year, the writing of any new regulations. He claims he wants to do this to give some security and certainty to the business community.
There are more than a few problems with this:
- First, this suggestion came after he met with an army of corporate lobbyists as part of the poorly named America Speaking Out campaign (It should be called The Pandering to Americans while Taking Money from Lobbyists campaign). If you want to meet with lobbyists; fine, but don’t pretend you are meeting with the everyday Americans you claim to represent.
But then again lobbyists are paid to know the issues and you should always trust people whose loyalty can be bought for cold, hard cash. They’re like strippers, they really do care about you—it’s not just because they’re getting paid. And a moratorium would make it certain that large financial institutions and the health insurance industry could continue to completely rape people for at least another year. Now that’s the kind of certainty you can count on!
- Second, federal agencies issue thousands of regulations annually that affect virtually every sector of the economy. I happen to work for a company that assists financial institutions with regulatory compliance and I can tell you that rules of enforcement are still being worked out for laws such as the Fair and Accurate Credit Transaction Act (FACTA) passed in 2003 to create red flag rules needed to protect consumers from identity theft—that’s right it’s 2010 and a law passed in 2003 is still being delayed to give financial institutions time to adapt. So you can trust me when I say the financial institutions will have plenty of time to prepare to meet (or figure out how to avoid) the new requirements
- Third, when Congress passes a law, it doesn’t spell out every detail, it lays down a blue print; without these rules we will be effectively delaying the enactment of laws for no valid reason because if the law is going to be enacted, then the business community is better off knowing sooner what will be required versus not knowing for another year and—as I noted with FACTA, even after the rules are written, enforcement is often delayed in order to give companies time to adjust. Wouldn’t it be better to speed up the regulations so that they know what they are sooner?
To get an idea of what I’m talking about, let’s look at the financial overhaul bill that will become law next week; the legislation explicitly spells out the lengthy timelines Congress expects it will take for agencies to come up with the new rules, partly because it also requires numerous studies, and because some provisions even depend on international agreements that are pending—rules on the amount of capital banks need to keep in reserve to hedge against loss are supposed to be drafted in 18 months, but they will probably be delayed because the U.S. is taking part in international negotiations on developing global capital standards.
According to NPR, Treasury Secretary Timothy Geithner acknowledged that implementing the new law will take time. “But we are determined to move as quickly as we can to provide clarity and certainty,” he said
Some parts, such as the oversight council and consumer bureau should happen rather quickly—these are things meant to help you—but Boehner would rather help the financial institutions who continue posting large quarterly profits, while refusing to lend to consumers and small businesses, as unemployment continues unabated for millions. But many other parts of the bill will take years to study, write, and then begin enforcement. Financial institutions are still struggling with some of the privacy provisions of the Gramm Leach Bliley Act passed in 1999 (best known for repealing the post-Great Depression Glass-Steagall Act which kept retail banks and investment banks separated).
Even the parts that could be created swiftly will likely wait for other provisions before they become truly effective. For example, it could take nearly three years for the predatory lending regulations that will be enforced by the new consumer bureau to take effect. Why? Because the new law calls for a two-year study before the regulators are even allowed to start writing the rules.
I don’t see why we need a one-year moratorium since it will already take well over a year for these laws to take effect, the moratorium will only delay what is already expected to take a long time, and prevent the completion of laws passed years before.
According to the Christian Science Monitor, “The moratorium on regulations would derail new rules to protect children from unsafe bassinets and cradles, new consumer protections for air travelers, and establishment of a public website disclosing federal contract information.”
To give you an idea of how many rules we are talking about, for the financial bill alone, we are probably looking at about 350 new rules that will need to be written.
You may be asking, why doesn’t Congress just write these rules in the law? If so, here is your answer:
Congress does not have the expert knowledge that the regulators do and even if they did, it would make passing bills almost impossible due to the extensive detail required. People already ignorantly call for ten-page bills because the current ones are so long, imagine how they would freak out if the rules were also contained therein. (I say ignorantly because people often make hyperbolic demands to know if a legislator reads every line of a bill—no, no they don’t, that’s why they have a paid staff that tears through each part of the bill and looks for the issues or concerns that they know would be important to the legislator.)
These federal regulations are the actual enforceable parts of the law (enforcing laws is the role of the Executive branch and the Supreme Court held decades upon decades ago that as long as proper instructions were given that regulatory agencies had the constitutional power to flesh out the laws).
So “alphabet soup” agencies like the FDA, EPA, OTC, FCC, etc., draft the rules that enforce the laws passed by Congress.
The manner in which they create these rules is spelled out in what’s known as the Administration Procedure Act (APA). Per the APA, regulators must post any possible new regulations in what’s known as the Federal Register. These rules are listed for a minimum of 30 days before they can take effect. During these thirty days, anyone can comment, offer amendments or object to regulation. This is actually the lobbyists favorite dirty little secret because while many citizens are able to at least pay a little attention to the drafting of laws they usually just relax and bask in the glory of their efforts after the law is passed without realizing that the law is still being shaped without their input, worse it is being shaped almost exclusively with the input of lobbyists who will use every power they have to bend the new regulations in their favor.
As if that weren’t enough, some regulations actually require a public hearing that can go on for several months (All the CSPAN watchers in the house say Yeah!).
Once a regulation takes effect, and becomes a “final rule” it is printed in the Federal Register and the Code of Federal Regulations, and, of course, it is posted on the Web site of the regulatory agency.
I put “final rule” in quotes because even at this point the rules are still subject to review by both the President and Congress based on Executive Order 12866. This allows Congress and the President to verify that the regulations properly follow the blue print drawn by Congress.
But wait, there’s more—all regulations require a cost-benefit analysis and those with an estimated cost of $100 million or more require an additional review called the Regulatory Impact Analysis (RIA). Once the RIA justifies the cost of the new regulation, then the Office of Management and Budget (OMB) must approve it before the regulation can take effect. The aforementioned Executive Order 12866 also requires all regulatory agencies to submit annual plans to the OMB as a way to establish regulatory priorities and improve regulatory coordination.
If you managed to read all of what I just wrote without falling asleep, you must realize that a moratorium is just adding a delay to a process that is already extensively long and detailed.
Jumping Jesus on a pogo stick people, BusinessWeek says it could even take a decade or more to fully impose all the new measures in the financial overhaul bill! A decade or more!
For example, the Volker rule, meant to ban banks from proprietary trading i.e., gambling with your money to make a profit, “may not take full effect for as long as a dozen years,” in the meantime, banks can continue to invest heavily in private-equity and hedge funds. That’s right, this rule could take a dozen years to study, review, and write before it could be enforced. If we add another year, I guess we could call it a Boehner’s dozen.
So knowing that most regulations will already take a long time to flesh out, why is Boehner pushing to freeze them? He says it’s because it would be “a wonderful sign to the private sector that they’re going to have some breathing room.” Pardon my cynicism but by breathing space, he must mean more time for lobbyists to plan how to eviscerate the new regulations once they are posted on the Federal Registry.
For decades the GOP has trumpeted deregulation (and the Democrats have blindly followed) and now they are trying to stop even the modest changes (There are good parts about the bill, but there are some parts that are not nearly as robust as I would prefer) required under this bill.
Even former Federal Reserve Chairman Alan Greenspan, the god of Ayn Randian objectivists everywhere, admitted his almost religiously fanatical belief that unfettered free markets would automatically do the right thing was deeply wrong.
“I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms,” Greenspan said.
Representative Henry Waxman, the Democratic chairman of the Government Oversight Committee of the House of Representatives pushed the former Fed chief, who left office in 2006, to clarify his explanation.
“In other words, you found that your view of the world, your ideology, was not right, it was not working,” Waxman said.
“Absolutely, precisely,” Greenspan replied. “You know, that’s precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well.”
If Alan Greenspan can admit he was mistaken about deregulation, can’t Boehner and the Republicans admit it too? Or are they incapable of moving beyond their simple-mind mantra that cutting taxes and eliminating regulations are the sole means to provide a stable and thriving economic system?
On a final note the rest of the GOP might want to consider not supporting Boehner on this since according to last month’s NBC/Wall Street Journal Poll, 65% said they wanted more regulation for the oil industry (versus 16% who want less); 57% want more regulation for Wall Street firms (compared with 15% who want less); 53% want more regulation for big corporations (versus 21% who want less); and 52% want more regulation for the health-care industry (compared with 27% who want less).