Both the NYT and Connor Raso’s post below warn darkly of rumored new regulatory reform legislation. But any new bill will be a breath of fresh air, compared to its archly-partisan predecessor, the Financial Regulatory Responsibility Act of 2011.
Connor and I roundly denounced the FFRA in the SSRN draft of our Rational Boundaries article. It directed the D.C. Circuit to vacate any challenged rule unless each of twelve impossible assessments had been met, unless the agency managed to prove irreparable harm by clear and convincing evidence. The FFRA was the kind of bill only someone who always precedes the word “regulation” with the prefix “job-killing” could love.
In contrast, the new bill should be more akin to the Independent Agency Regulatory Analysis Act of 2012 and the Principled Rulemaking Act of 2015, both which seem to have been written by well-intentioned, good-government policy wonks, eager to codify best practices.
The published version of Rational Boundaries discussed the IRAA, since the FFRA had died by that time. Our main beef was it subtly reversed Executive Order 12866’s policy of protecting OIRA’s dialog with the Executive Agencies from judicial review, which it accomplished by deeming CBA “part of the whole record of agency action.”
The PrRA omits this clause and indeed says nothing, one way or the other, about judicial review. I hope the rumored legislation will take the logical next step, and preclude judicial review of the independent agencies’ CBO-reviewed CBA.
One line in Rational Boundaries that even our staunchest opponents agree with is that “Litigation is a terrible way to do cost-benefit analysis.” CBA is a conversation, not a computation, and a conversation with the Congressional Budget Office could clear up in 20 minutes points that could otherwise preoccupy litigators for 20 months.
I stand by the praise I’ve lavished the SEC’s economic analysis, but I have to admit that outside review, whether by OIRA or the CBO, would improve the quality and focus of the CBA and make it more influential in shaping the rules themselves. Right now, CBA sometimes feels a little like the warnings and disclaimers in the manual for a new gadget that make it hard to find out how to turn it on. Both are drafted with litigation principally in mind, rather than on using or improving the product.
Independent agencies are supposed to be independent of the President, but many, like the SEC, have always been dependent on Congress. Switching the reviewing body from OIRA to the CBO is an elegant solution. Once Congress has had its say, why would Congress want its own conversations with the agency about benefits and costs to be used against the resulting rule in court?
What the rumored new CBA legislation would require is basically the same as the SEC’s current economic analysis, performed in the name of satisfying its mandate to consider efficiency, competition and capital formation. Any new bill should be sure to subsume and supersede that older mandate, call for discussions of the resulting analysis with the CBO, and exempt the whole process of independent agency economic analysis from judicial review.
* Bruce Kraus is a partner at Kelley Drye & Warren LLP and worked at the predecessor of the SEC’s Division of Economics and Risk Assessment from 2009 to 2011.