The idea of a well-regulated financial system, with governmental oversight, that has some limits on how royally it can screw over the consumer, is just anathema to too many of our elected officials. You expect it from Republicans, but you don't expect it from Democrats. And yet, Democratic Virginia Sen. Mark Warner is working with Republican Sens. Rob Portman of Ohio and Susan Collins of Maine to do just that. Their proposed legislation would restrict regulators in writing new rules for Wall Street and "most likely would include a measure to subject the Consumer Financial Protection Bureau, the Securities and Exchange Commission and other independent agencies to a heightened cost-benefit analysis and review process for major rules, according to people briefed on the plans."
Supporters say the legislation would bring rule-making standards for independent regulators closer in line with those for executive branch agencies, providing more consistency and transparency in the rule-making process.
But critics, including top Democrats, warn that the legislation is instead intended to create additional burdens and delays, as well as make agency rules more vulnerable to legal challenges.
"Reform is badly needed, but this package heads in the wrong direction, giving lobbyists and lawyers more chances to block outcomes they don't like," Senator Elizabeth Warren, Democrat of Massachusetts, said in a statement. "Reform should focus on a level playing field for working families and small businesses, not more ways to tilt the game for the rich and powerful."
Warner isn't the lone Democrat in this: North Dakota’s Heidi Heitkamp, West Virginia’s Joe Manchin, and independent Angus King of Maine are also reportedly part of the discussions, meaning that they'd need two or three more Democrats to avoid blocking the legislation on the Senate floor, if it makes it that far. It's expected to be introduced in the next few weeks. The supporters say that it would just mean that the president could "impose stronger requirements on the independent regulators, including additional cost-benefit analysis, not that an administration would be required to do so." So should we end up with a Republican in the White House, that Republican could basically neuter the rule-making process on already established laws.
The proposed legislation would reportedly also create a new branch of the Congressional Budget Office to conduct cost-benefit analyses when the president requests them. That could create a chilling effect on regulators, critics say, who would be constrained by calculating how much their proposal might cost as opposed to how necessary the rule could be. It would also lessen the independence of the regulators, those very regulators have pointed out.
"Beyond injecting an administration's influence directly into our rule-making, the bill also would interfere with our ability to promulgate rules critical to our missions in a timely manner and would likely result in unnecessary and unwarranted litigation in connection with our rules," wrote the heads of the consumer protection bureau, the S.E.C., the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the National Credit Union Administration.
President Obama threatened to veto similar legislation being worked on in the House last year, and opposition from financial regulators would probably bring another veto threat. It shouldn't have to get that far, though. Democrats should not be working to undermine the few financial protections Dodd-Frank brought to consumers and to the financial system.