With supporters touting it as an antidote to excessive, costly, and job-killing regulations, the U.S. House of Representatives on Friday approved a bill that imposes new cost-benefit analyses upon financial regulations.
Introduced by Rep. Scott Garrett (R-NJ), Chairman of the Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, H.R. 1062, the SEC Regulatory Accountability Act of 2013, levels a variety of pre-rulemaking demands on the SEC.
The bill directs the SEC to: assess the significance of the problem the regulation is designed to address; determine whether the estimated costs of the proposed regulation justify its estimated benefits; and identify alternatives to the proposed regulation that are available.
The SEC would also be required to review its regulations every five years to determine whether they are “outmoded, ineffective, or excessively burdensome.” Using the results of this review, the agency would need to consider modifying or repealing such rules.
For rules expected to have an economic impact greater than $100 million annually, the bill would require the SEC to develop and publish a plan to assess whether the regulation has achieved its stated purposes. It would direct the agency, within two years after the date such a rule was published, to issue a report assessing its costs, benefits, and consequences, using performance measures that were identified when the rule was adopted.
H.R. 1062 was approved by a 235-161 vote, with 17 Democrats among those who supported it. The bill now heads to the Senate.
Among the amendments added to the bill was a requirement that the SEC also measure potential job creation, or losses, as the result of an issued rule. Texas Republican Pete Sessions, who proposed that amendment, said the bill was needed to curb excessive government regulations that “are a barrier to private sector job growth and the creation of those jobs.” The bill, he said, “ensures that the federal government does not necessarily burden American companies with burdensome regulations by guaranteeing that those regulations are appropriate and necessary.
Rep. Jeb Hensarling (R-Texas), chairman of the Financial Services Committee, said the bill's requirements offer a “common sense” approach that forces government officials to assess the costs and consequences of its actions the same way families struggling to make ends meet tackle “kitchen-table economics.”
Using a bit of political jujitsu, Garrett said his legislation would essentially reiterate that the SEC is subject to an executive order issued by President Obama in July 2011. It called upon regulatory agencies to commit to more comprehensive assessments of the costs and benefits inherent in any new rules, craft regulations in “plain language,” and review past actions in an effort to modify, or weed out, outdated and excessively burdensome regulations. Nevertheless, a policy statement released earlier this week by the White House promised to veto the bill should it pass in the Senate.
Critics say the legislation would effectively cripple the SEC, diverting resources from rulemaking and enforcement. Among those weighing in was Americans for Financial Reform (AFR), with a letter signed by nearly 200 partners and supporters. It decried the requirement to separately analyze the cost and benefits of the entire set of “available regulatory alternatives” in addition to those of the actual rule being considered.
“Since this set of alternatives may contain numerous possibilities, this requirement alone could add dozens of analyses prior to any new rulemaking,” AFR wrote. It added: “The lengthy list of new requirements in this bill is transparently intended to create roadblocks in the way of passing any investor protection rule. The effect would be to halt the process of implementing rules under the Dodd-Frank Act – and potentially also rulemakings under more recent laws such as the JOBS Act.”
“H.R. 1062 is a regulatory ‘accountability' act only if you believe that the SEC's primary accountability should be to the securities firms it is supposed to regulate rather than to the public it is supposed to protect,” wrote Barbara Roper, director of investor protection for the Consumer Federation of America. “This bill would further slow the already glacial regulatory process and further empower Wall Street interests to derail needed reforms.”
Roper added that the bill fails its own cost-benefit test as “sponsors appear to have ignored its significant costs,” estimated by the Congressional Budget Office to be $23 million for implementation.