The Office of Information and Regulatory Affairs submits major new regulations from executive branch agencies to a cost-benefit analysis on the basis of an executive order first issued by President Reagan in 1981.
In practice, this obscure department in the Office of Management and Budget has often become a back door for industry to obstruct safety, health and environmental rules it finds too costly.
A new report, "Down the Regulatory Rabbit Hole," describes how OIRA has failed to meet its 90-day deadline on 70 of the 120 rules it has under review.
Some rules have languished for months and even years with no explanation for the delay, according to the report, published in June by the Coalition for Sensible Safeguards – a group of more than 150 labor unions, small business and consumer groups, and liberal think tanks.
And now, "bipartisan" legislation introduced into the Senate in June would bring even independent regulatory agencies under OIRA's baleful control, submitting them to a White House supervision that their designation as "independent" is supposed to block.
That would mean that key Wall Street regulators, such as the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC) and the newly created Consumer Financial Protection Bureau (CFPB) would have to clear even higher hurdles to rein in the banks and prevent another financial crisis.
The SEC in particular, working at its own glacially slow pace, has already missed many of the deadlines for rule-making set by Congress in the Dodd-Frank financial reform, and other agencies are struggling to keep to the timetable set by the law.
Requiring new rules from these financial regulators to undergo OIRA review would mean further delays — to the gratification of a banking industry that is already doing its utmost to sabotage regulatory reform.
The reason for delays in OIRA reviews, the CSS report suggests, is not hard to discern.
A rule that seeks to protect workers from silica dust, for example, was sent to OIRA in February 2011 and has yet to pass review. In that time, the agency has met with outside groups 11 times to discuss the rule — nine of those meetings were with industry groups opposed to the regulation.
The Senate bill, "Independent Agency Regulatory Analysis Act of 2013," introduced by Ohio Republican Rob Portman — who was touted as a potential vice presidential nominee in the 2012 presidential election — seeks to put new financial regulations through the same wringer.
Cosponsors are Maine Republican Susan Collins and Virginia Democrat Mark Warner, who made a fortune as a venture capitalist in telecommunications and who often sides with Republicans on economic issues.
Late last month, the Senate approved a new administrator for OIRA, Howard Shelanski, who has a doctorate in economics and a law degree and most recently has served as chief economist at the Federal Trade Commission.
Under questioning, Shelanski pledged to Sen. Carl Levin, D-Mich., that he would do his utmost to reduce OIRA's backlog and that after his time at the FTC he cherished the independence of independent regulatory agencies.
But Shelanski also pledged to Portman that he would seek to reduce what the Ohio senator characterized as the exceptionally high cost of new regulations imposed by the Obama administration, and he did not demur when Portman mentioned his plan to bring independent agencies under OIRA review.
Even for the executive branch, agencies such as the Environmental Protection Agency (EPA) and the Occupational Safety and Health Administration (OSHA) are already subject to OIRA review. However, a cost-benefit analysis as a litmus test for new regulations is questionable.
"It systematically overestimates regulatory costs," Sidney Shapiro, a law professor at Wake Forest University and an expert on regulatory policy, wrote in a blog on the Shelanski hearing, "while underestimating — and even ignoring outright — important regulatory benefits, particularly those benefits — such as protecting human lives, children's health, and ecological integrity — that cannot be meaningfully reduced to dollar-and-cents terms."
In terms of financial regulation, how do you measure the benefit of preventing the lost jobs, lost savings, the foreclosures, the disrupted careers, even in some cases, the ruined lives caused by a severe financial crisis like the one that broke in 2008 due to the reckless behavior of a deregulated banking industry?
Lawmakers should give that considerable thought before submitting financial regulatory agencies to OIRA's tender mercies.
Even if the highly qualified Shelanski manages to improve the agency's efficiency and end its anti-regulatory bias, there is no justification for rule-making by independent financial regulators to face addititonal hurdles.
Darrell Delamaide has reported on business and economics from New York, Paris, Berlin and Washington for Dow Jones news service, Barron's, Institutional Investor and Bloomberg News service, among others. He is the author of four books, including the financial thriller Gold.
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