Senate confronts stealth attack on financial regulation


With attention in Washington, D.C., divided between election post-mortems and the looming financial catastrophe that is the “fiscal cliff,” a truly awful piece of legislation might well sneak through the 112th Congress before it adjourns at year’s end.

The Independent Agency Regulatory Analysis Act (S. 3468) is made more awful by the fact that it has at least some bipartisan support. It appears to be so well-greased that it could be sent to the Senate floor without hearings that would disclose how awful it truly is.

The bill is a stealth attack on independent government regulation masquerading as careful “cost-benefit analysis.” It would authorize the president to require regulatory agency rulemakers to perform 13 new analyses of regulatory costs before finalizing rules. Then the White House Office of Information and Regulatory Affairs (50 people who work for the Office of Management and Budget) would get to review all agency regulations.

Mostly this just sounds like just so much numbing bureaucratic falderal — boring, but not awful. But in Washington, a lot of money gets made in the seams of bureaucracy. If a regulated industry can throw a monkey wrench into the process, casting doubt and slowing things down, then regulation takes much longer to happen. Banks and industry save billions, and consumers go without proper protection.

It will not surprise you to learn that the financial industry is among the bill’s strongest supporters. Presidents come and go; control of the House and Senate passes from one party to another. But the banks — in the immortal words of Sen. Dick Durbin, D-Ill. — run the place.

“This is a sideways attack on Dodd-Frank,” said Lisa Donner, executive director of Americans for Financial Reform, a consortium of consumer-advocacy and good-government groups. The Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law in July 2010. It is an attempt to curtail some of the more egregious practices of the financial industry that helped crash the economy in 2008.

Dodd-Frank, thanks to the diligent work of financial industry lobbyists, isn’t as strong as it should have been. Its rules haven’t fully taken effect and until last Tuesday, many Republicans in Congress still hoped to repeal it. For the industry, the key now is to drag out the process as long as possible.

That’s what S. 3468 is all about. Regulators, who already do significant cost-benefit analyses, will have to jump through more hoops. And then a White House office of 50 people will have to vet the work done by hundreds of other people throughout the federal government.

The Independent Agency Regulatory Analysis Act is under consideration by the Senate’s Committee on Homeland Security and Governmental Affairs. Committee Chairman Joseph Lieberman, I-Conn., has indicated he will mark up the bill this month. That means the committee will make whatever changes it wants in the bill and send it directly to the floor without exposing it to the scrutiny of public hearings.

Lieberman is obviously in a hurry. He declined to run for re-election, and this lame-duck session is the last Congress will see of him. Is this really the way he wants to be remembered? Perhaps one committee member, Democrat Claire McCaskill of Missouri, should ask him.

Late last month, six top financial regulators — including Fed Chairman Ben Bernanke and Mary L. Schapiro, chairman of the Securities and Exchange Commission — appealed to Lieberman and Susan Collins of Maine, the committee’s ranking Republican, to slow down the train.

The regulators pointed out that independent regulatory agencies were established to be just that — independent. By requiring that new regulations be sent to the White House for review, the regulators said, the bill would “interfere without 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.”

This process is truly sleazy. The only way to get the bill through Congress before the lame duck session ends is to bypass the hearing process; this is something you’d expect from the Missouri Legislature but not the United States Senate.

It is by no means certain that S. 3468 would survive a floor vote in the Democrat-controlled Senate.

By wide margins, Americans say they want financial reform. By spending wildly, the industry has fought it off. The industry’s best hope that Americans are sick of politics and won’t pay attention. But this is precisely the sort of thing that makes them sick.