At this event, scholar Hester Peirce discusses regulatory policy.

1. Regulatory
Oversight
Essen3als
Part
II:
Monitoring
and
Shaping
the
Debate
Hester
Peirce
Senior
Research
Fellow
Mercatus
Center
March
12,
2013

2. Course
Topics
q Why
do
regula3ons
maJer?
q To
what
extent
can
oversight
make
a
difference?
q Where
is
informa3on
about
regula3ons
found?
q What
should
you
be
asking
regulators
before,
during,
and
aPer
the
rulemaking
process?
q How
are
rules
made?

3. BoJom
Line:
What
You
Need
to
Be
Thinking
About
As
We
Go
Through
Specifics
• DraP
statutes
with
oversight
in
mind
v Repor3ng/tes3mony
requirements
v Specific
analysis
requirements
v Sunsets,
retrospec3ve
review
requirements
• Express
an
interest
early
v Invite
regulators
in
for
briefings
about
topics
of
importance
to
your
member
v Ask
regulators
to
keep
you
updated
on
their
progress
• Ask
regulators
lots
of
ques3ons
v What
are
their
priori3es
and
why?
v What
assump3ons
are
they
making
and
data
are
they
using
in
rulemakings?
v How
have
they
sought
input
from
the
public
and
relevant
experts?
v Have
they
considered
par3cular
comments
and
how?
v How
do
they
plan
to
measure
success?
•
Bring
in
reinforcements—GAO,
IGs

4. The
Landscape
Encourage
agency
to
think
outside
of
the
statutory
box,
but
watch
out
for
agency
aDempts
to
regulate
without
coming
to
Congress
for
more
statutory
authority.
Statutory
Authority
Agency’s
Chosen
Regulatory
Approach.
Don’t
let
this
define
the
universe.
You
might
want
the
agency
to
consider
an
op>on
that
is
within
the
agency’s
statutory
authority,
but
the
agency
has
not
considered.
Another
agency
or
another
level
of
government
may
have
jurisdic>on
that
makes
it
the
best
source
of
a
solu>on.

5. Rulemaking
Process
in
Brief
F
Pre-­‐rule
ANPRM
NPRM
CComm-­‐
Stage—the
Advanced
No3ce
of
ent
Period
Final
Rule
agency
is
No3ce
of
Proposed
and
OMB
thinking
Proposed
Rule-­‐ Review
about
what
Rule-­‐
making
Period
to
do
making
Retrospec3ve
Review

6. How
Long
Does
the
Whole
Process
Take?
• SEC
approves
MSRB
Rule
G37
restric3ng
pay
to
play
in
municipal
It
can
take
many
securi3es
markets
years
for
an
idea
in
April
1994
• SEC
proposes
a
rule
to
restrict
pay
the
minds
of
staffers
to
play
by
investment
advisers
at
a
regulatory
August
1999
• SEC
reproposes
rule
to
restrict
pay
to
play
by
investment
advisers
agency
to
become
a
• SEC
withdraws
1999
proposal
August
2009
final
rule.
If
you
• SEC
adopts
rule
to
restrict
pay
to
care
about
a
rule,
play
by
investment
advisers
July
2010
keep
asking
about
it.

7. How
Long
Does
the
Whole
Process
Take?
• Dodd-­‐Frank
is
signed
into
law
• §
951
requires
shareholder
votes
on
But,
depending
on
the
July
2010
execu3ve
comp
&
golden
parachutes
circumstances
and
the
• SEC
proposes
a
rule
to
implement
§
pressure
the
agency
Oct.
28,
2010
951
faces,
the
process
can
also
move
a
lot
faster.
Nov.
18,2010
• Comment
deadline
If
you
don’t
act
fast,
you
won’t
get
a
• Final
rule
is
published
in
the
Federal
Register
chance
to
weigh
in.
Feb.
2,
2011

8. Oversight
Op3on:
Ask
About
Very
Slow
or
Very
Fast
Rulemaking

9. Sample
Advanced
No3ce
of
Proposed
Rulemaking
.
.
.
Without
a
mandate
from
Use
of
Deriva>ves
by
Investment
Companies
Under
the
Investment
Company
Act
of
1940
AGENCY:
Securi3es
and
Exchange
Congress,
the
S.E.C.
is
proceeding
Commission.
ACTION:
Concept
release;
request
for
with
cau3on.
comments.
SUMMARY:
The
Securi3es
and
Exchange
Commission
(the
Last
year,
the
agency
began
a
broad
‘‘Commission’’)
and
its
staff
are
reviewing
the
use
of
study
into
the
mutual
fund
industry’s
deriva3ves
by
management
investment
companies
registered
under
the
Investment
Company
Act
of
1940
(the
‘‘Investment
use
of
deriva3ves,
a
growing
Company
Act’’
or
‘‘Act’’)
and
companies
that
have
elected
to
be
treated
as
business
development
companies
(‘‘BDCs’’)
phenomenon.
The
S.E.C.’s
concept
under
the
Act
(collec3vely,
‘‘funds’’).
To
assist
in
this
review,
release
approved
on
Wednesday
will
the
Commission
is
issuing
this
concept
release
and
request
for
comments
on
a
wide
range
of
issues
relevant
to
the
use
of
take
the
review
a
step
further,
asking
deriva3ves
by
funds,
including
the
poten3al
implica3ons
for
fund
leverage,
diversifica3on,
exposure
to
certain
securi3es-­‐
the
public
to
weigh
in
on
funds’
use
related
issuers,
porlolio
concentra3on,
valua3on,
and
related
of
deriva3ves
and
the
current
maJers.
In
addi3on
to
the
specific
issues
highlighted
for
comment,
the
Commission
invites
members
of
the
public
to
regulatory
landscape.
.
.
address
any
other
maJers
that
they
believe
are
relevant
to
the
use
of
deriva3ves
by
funds.
The
Commission
intends
to
Ben
Protess,
S.E.C.
Examines
Mutual
consider
the
comments
to
help
determine
whether
regulatory
ini3a3ves
or
guidance
are
needed
to
improve
the
current
Funds’
Use
of
Deriva:ves,
DealBook,
regulatory
regime
for
funds
and,
if
so,
the
nature
of
any
such
ini3a3ves
or
guidance.
New
York
Times,
Aug.
31,
2011.
76
FR
55273
(Sept.
7,
2011).

10. When
Should
I
Weigh
In?
q To
have
an
effect
late
in
the
process,
you
need
to
lay
the
groundwork
as
early
in
the
process
and
as
oPen
as
possible.
q Find
out
what
agencies’
priori3es
are
and
how
they
are
contempla3ng
achieving
them.
q It
is
easier
to
get
an
agency
to
think
outside
the
box
early
in
the
process,
before
it
is
commiJed
to
one
par3cular
course.

11. Oversight
Op3on:
Encourage
Agency
to
Ask
Data
on
Costs
and
Benefits
SUMMARY:
The
Securi3es
and
Exchange
Commission
is
reques3ng
data
and
other
informa3on,
in
par3cular
quan3ta3ve
data
and
economic
analysis,
rela3ng
to
the
benefits
and
costs
that
could
result
from
various
alterna3ve
approaches
regarding
the
standards
of
conduct
and
other
obliga3ons
of
broker-­‐dealers
and
investment
advisers.
We
intend
to
use
the
comments
and
data
we
receive
to
inform
our
considera3on
of
alterna3ve
standards
of
conduct
for
broker-­‐dealers
and
investment
advisers
when
providing
personalized
investment
advice
about
securi3es
to
retail
customers.
We
also
will
use
this
informa3on
to
inform
our
considera3on
of
poten3al
harmoniza3on
of
certain
other
aspects
of
the
regula3on
of
broker-­‐dealers
and
investment
advisers.

12. Oversight
Op3on:
Commen3ng
on
a
Rule
Washington Post
14,479 letters supporting the Volcker Rule
By
Suzy
Khimm,
Published:
February
15,
2012
Wall
Street
flooded
the
government
with
cri3cism
of
the
Volcker
Rule
this
week,
as
the
period
for
public
feedback
on
the
regula3on-­‐in-­‐progress
came
to
a
close.
The
SEC
received
241
detailed,
unique
comment
leJers
on
the
regula3on,
mostly
from
financial
firms
that
have
cri3cized
the
law.
Industry
group
representa3ves
have
also
held
the
bulk
of
the
face-­‐
to-­‐face
mee3ngs
that
lobbyists
and
other
stakeholders
have
had
with
federal
regulators.
But
they
aren’t
the
only
ones
who
have
weighed
in.
The
Securi3es
and
Exchange
Commission
also
received
14,479
generic
form
leJers
in
support
of
a
strong
version
of
the
Volcker
Rule,
which
prohibits
specula3ve
trading
by
banks
for
their
own
benefit.
By
my
rough
count,
as
of
last
week:
» 18,179
form
leJers
» 512
unique
comment
leJers

13. Does
Commen3ng
Make
a
Difference?
Changes
in
Final
Rule
The
SEC's
proposals
aJracted
much
aJen3on,
drawing
over
20,000
comments-­‐
among
the
most
comments
for
a
proposal
in
the
Commission's
history.
.
.
.
numerous
comments
spoke
specifically
to
the
Ka3e
Couric
Clause.
.
.
.
Instead
of
moving
for-­‐
ward
immediately
with
its
en3re
ini3al
proposal,
the
Commission
adopted
some
rules
and
issued
a
separate
release
request-­‐
ing
addi3onal
comments
on
disclosure
of
compensa3on
of
those
who
are
not
exec-­‐
u3ve
officers.
The
SEC
notably
recognized
that
commenters
perceived
problems
with
the
original
proposal
to
add
disclosure
for
highly
compensated
employees
who
did
not
serve
as
execu3ve
officers.

14. Oversight
Op3on:
Ask
for
a
Re-­‐proposal
if
Ini3al
Proposal
is
Inadequate
or
Agency
Is
Planning
to
Finalize
Something
Very
Different
from
Proposal
On
January
26,
2011,
the
Council
issued
a
no3ce
of
proposed
rulemaking
(the
‘‘NPR’’)
(76
FR
4555)
through
which
it
sought
public
comment
regarding
the
specific
criteria
and
analy3c
framework
that
the
Council
intends
to
apply
in
the
Determina3on
Process.
The
comment
period
for
the
NPR
closed
on
February
25,
2011.
In
response
to
comments
that
the
Council
received
on
the
NPR,
the
Council
is
issuing
a
second
no3ce
of
proposed
rulemaking
(the
‘‘Proposed
Rule’’)
and
proposed
interpre3ve
guidance
(the
‘‘Proposed
Guidance’’)
to
provide
(i)
addi3onal
details
regarding
the
framework
that
the
Council
intends
to
use
in
the
process
of
assessing
whether
a
nonbank
financial
company
could
pose
a
threat
to
U.S.
financial
stability,
and
(ii)
further
opportunity
for
public
comment
on
the
Council’s
proposed
approach
to
the
Determina3on
Process.
FSOC,
Authority
to
Require
Supervision
and
Regula3on
of
Certain
Nonbank
Financial
Companies,
76
Fed.
Reg.
64,264
(Oct.
18,
2011).

15. Oversight
Op3on:
Play
a
Role
in
Bringing
Important
Comments
to
Their
AJen3on
.
.
.
One
commenter
asserted
that
the
cost
of
compliance
will
exceed
10
to
20
3mes
the
amount
projected
by
the
Commission.
.
.
.
The
Commission
con3nues
to
believe
that
the
cost
to
develop
and
maintain
compliance
policies
and
procedures
will
not
be
significant
for
most
brokers-­‐dealers.
.
.
.
the
compliance
cost
is
a
weighted
average
that
skews
lower
because
most
brokers
and
dealers
who
already
maintain
compliance
policies
and
procedures
will
not
face
significantly
greater
costs.
Although
several
broker-­‐
dealers
may
indeed
incur
a
cost
of
compliance
that
will
exceed
the
amount
es3mated
in
the
Proposing
Release,
the
Commission
an3cipates
that
these
broker-­‐dealers
will
be
significantly
outnumbered
by
brokers-­‐dealers
who
will
incur
minimal
addi3onal
costs.
.
.
.
SEC,
Risk
Management
Controls
for
Brokers
or
Dealers
With
Market
Access;
Final
Rule,
75
FR
69792
(Nov.
15,
2010).

16. Finding
a
No3ce
of
Proposed
Rulemaking
You
can
search
by
Federal
Register
cite
or
by
keyword.

18. If
you
click
here,
it
takes
you
to
regula3ons.gov,
another
place
to
look
for
agency
no3ces.
It
is
also
a
place
where
you
can
make
comments.

20. A
Note
on
Federal
Register
Publica3on
• SEC
vote
on
Adviser
• It
typically
takes
about
a
7/11/2007
An3fraud
Rule
week
for
the
Federal
Register
to
publish
a
• Rule
published
on
no3ce
aPer
an
agency
SEC
website
8/3/2007
transmits
it.
• Agencies
may
post
no3ces
on
their
own
• Rule
published
in
8/9/2007
Federal
Register
websites
first,
but
even
this
can
take
some
3me.

22. Oversight
Op3on:
Talk
with
Office
of
Management
and
Budget
q In
addi3on
to
the
public
comment
process,
for
execu3ve
agencies,
there
is
a
parallel
process
q The
White
House
Office
of
Management
and
Budget
has
an
office—the
Office
of
Informa3on
and
Regulatory
Affairs
(OIRA)—that
reviews
rules
q Series
of
Execu3ve
Orders
governs
this
process
q These
Execu3ve
Orders
require
agencies
to
perform
regulatory
impact
analysis,
which
OIRA
reviews
q Public
can
direct
comments
to
OIRA

23. Execu3ve
Orders
• President
Clinton
(1993)
• E.O.
12866
focused
OIRA
oversight
on
“significant”
rules
• Benefits
must
“jus3fy”
costs
• Qualita3ve
factors
can
be
considered
• Agencies
must
develop
plans
for
retrospec3ve
analysis
• President
Obama:
Reaffirmed
and
added
to
E.O.
12866
in
E.O.
13563

24. "Are you achieving
this regulatory
objective in the
smartest, most
effective, most
efficient way
possible?”
OIRA Staffer Michael Fitzpatrick, quoted at http://
www.npr.org/2011/11/28/142721675/obama-office-
alters-more-federal-rules-than-bush

25. Major
Elements
of
Regulatory
Impact
Analysis
1. Define
the
desired
outcome.
2. Define
and
iden3fy
the
root
cause
of
the
systemic
problem
that
must
be
solved
to
achieve
the
desired
outcome.
3.
Develop
a
wide
variety
of
alterna3ves
and
assess
their
effec3veness.
4. Assess
costs,
benefits,
cost-­‐effec3veness,
and
net
benefits
of
alterna3ves.

26. An
Everyday
Example
of
Economic
Analysis

27. Requirements
Vary
With
Importance
of
Regula3on
• 3000-­‐4000
final
regula3ons
issued
annually
• 200-­‐400
“significant”
final
rules
include
basic
cost/benefit
analysis
and
are
reviewed
by
OIRA
• 60-­‐100
“major”
or
“economically
significant”
final
rules
(>
$100
million
annual
impact)
require
a
full
Regulatory
Impact
Analysis
• Regula3ons
with
impact
exceeding
$1
billion
must
have
a
formal
quan3ta3ve
uncertainty
analysis

28. Oversight
Op3on:
Check
to
See
if
All
Major
Rules
Are
Being
Flagged

29. Sample
Regulatory
Impact
Analysis
REGULATORY
IMPACT
We
have
examined
the
impact
of
the
ANALYSIS
joint
interagency
Rule
being
issued
to
interpret
and
implement
the
For
Secure
and
Fair
Enforcement
for
Registra>on
of
Mortgage
Loan
Mortgage
Licensing
Act
of
2008,
Title
Originators
Final
Rulemaking
V
of
the
Housing
and
Economic
January
8,
2010
Recovery
Act
of
2008
(P.L.
110-­‐289,
122
Stat.
2654,
12
U.S.C.
5101
et
(Revised
July
1,
2010)
seq.)
(.
.
.
The
joint
interagency
Rule
Office
of
the
Comptroller
of
requires
loan
originators
to
register
the
Currency
and
disclose
their
registra3on
hJp://www.regula3ons.gov/#! numbers
to
consumers.
documentDetail;D=OCC-­‐2010-­‐
0007-­‐0002

30. Regulatory
Impact
Analysis
This
is
the
es3mate
used
for
com-­‐
parison.

31. Regulatory
Impact
Analysis
This
is
the
lowest
cost
op3on.

32. Regulatory
Impact
Analysis
IX.
Conclusion
Because
of
the
constraints
described
above,
the
Agencies
are
precluded
from
implemen3ng
the
Act
using
the
less
costly
performance
standard
described
in
this
RIA
that
reduces
the
burden
imposed
on
banks
through
automa3on.
Accordingly,
given
the
constraints
imposed
on
OCC
by
the
Act,
and
based
on
the
es3mated
mean
cost,
the
joint
interagency
Rule
is
the
least
cost
op3on
available
to
the
OCC.

33. Regulatory
Impact
Analysis
The
Act,
therefore,
sets
forth
an
atypical
principal/vendor
rela3onship
in
which
the
Agencies
are
required
to
proceed
by
developing
modifica3ons
to
an
exis3ng
state
licensing
system
and
are
not
free
to
use
a
compe33ve
process
to
select
a
vendor
or
create
a
new
registry
designed
solely
for
federal
registrants.
This
limita3on
on
the
Agencies’
choice
of
registry
plalorm
creates
a
monopoly
for
its
operator,
SRR
(a
wholly
owned
subsidiary
of
the
CSBS).
This
situa3on
severely
limited
the
ability
of
the
Agencies
to
nego3ate
the
range
and
type
of
implementa3on
op3ons
that
could
have
increased
efficiency
and
reduced
the
regulatory
burden
(i.e.,
the
cost)
of
the
joint
interagency
Rule.

34. Comparing
Alterna3ves
Some3mes
None
of
the
Op3ons
is
Good
hJp://water.epa.gov/scitech/wastetech/guide/construc3on/upload/2008_11_25_guide_construc3on_proposed_proposed-­‐econ-­‐20081114.pdf

35. Oversight
Op3on:
Ask
for
RIA
Results
• Ask
regulators
to
let
you
know
when
an
RIA
shows
nega3ve
net
benefits
• Ask
regulators
to
let
you
know
when
the
statute
prevents
them
from
pursuing
an
alterna3ve
that
would
be
more
cost-­‐
effec3ve

36. Grading
the
Regulators

37. Oversight
Op3on:
Ask
Ques3ons
about
the
Regulatory
Impact
Analysis
Based
on
Report
Card
Regulatory Scoring
Agency:
Treasury et. al.
Rule title:
Risk-Based Capital Guidelines; Capital Adequacy Guidelines; Capital Maintenance: Standardized Risk-Based Capital Rules (Basel II: Standardized Option)
RIN
1557-AD07 RIA Yes
Stage Publication Date
Proposed Rule 7/29/2008
Rule summary:
The Office of the Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve System (Board), Federal Deposit Insurance Corporation (FDIC), and
Office of Thrift Supervision (OTS) (collectively, the agencies) propose a new risk-based capital framework (standardized framework) based on the standardized
approach for credit risk and the basic indicator approach for operational risk described in the capital adequacy framework titled ‘‘International Convergence of Capital
Measurement and Capital Standards: A Revised Framework’’ (New Accord) released by the Basel Committee on Banking Supervision. The standardized framework
generally would be available, on an optional basis, to banks, bank holding companies, and savings associations (banking organizations) that apply the general risk-
based capital rules.
Openness Score Comments
1. How easily were the RIA, the proposed rule, and any supplementary materials found online? 3 See Topic 1 Tab
2. How verifiable are the data used in the analysis? 1 See Topic 1 Tab
3. How verifiable are the models and assumptions used in the analysis? 2 See Topic 1 Tab
4. Was the Regulatory Impact Analysis comprehensible to an informed layperson? 3 See Topic 1 Tab
Total Openness (Sum of 1-4) 9
Analysis Score Comments
5. How well does the analysis identify the desired outcomes and demonstrate that the regulation will achieve them? 1 See Topic 2 Tab
6. How well does the analysis identify and demonstrate the existence of a market failure or other systemic problem
the regulation is supposed to solve? 3 See Topic 2 Tab
7. How well does the analysis assess the effectiveness of alternative approaches? 3 See Topic 2 Tab
8. How well does the analysis assess costs and benefits? 2 See Topic 2 Tab

38. Independent
Regulatory
Agencies
• Not
subject
to
execu3ve
orders
on
economic
analysis
• Some3mes
their
own
organic
statutes
require
them
to
do
analysis
• Tend
not
to
do
economic
analysis
absent
a
statutory/judicial
prompt

39. Oversight
Op3on:
Ask
the
Independent
Regulators
to
Do
Regulatory
Impact
Analysis
• Regulatory
impact
analysis
is
a
tool
that
regulators
should
use
regardless
of
whether
they
are
told
by
statute
or
execu3ve
order
to
do
so
• One
could
argue
that
the
principles
of
good
rulemaking
derived
from
the
Administra3ve
Procedure
Act
requires
economic
analysis

40. Sample
Statutory
Requirement:
SEC
Whenever
pursuant
to
this
subchapter
the
Commission
is
engaged
in
rulemaking
and
is
required
to
consider
or
determine
whether
an
ac3on
is
necessary
or
appropriate
in
the
public
interest,
the
Commission
shall
also
consider,
in
addi3on
to
the
protec3on
of
investors,
whether
the
ac3on
will
promote
efficiency,
compe33on,
and
capital
forma3on.
15
U.S.C.
§
77b(a)

41. Judicial
Assessment
of
SEC’s
Economic
Analysis
.
.
.
Here
the
Commission
inconsistently
and
opportunis3cally
framed
the
costs
and
benefits
of
the
rule;
failed
adequately
to
quan3fy
the
certain
costs
or
to
explain
why
those
costs
could
not
be
quan3fied;
neglected
to
support
its
predic3ve
judgments;
contradicted
itself;
and
failed
to
respond
to
substan3al
problems
raised
by
commenters.
.
.
.
Business
Roundtable
v.
SEC,
647
F.3d
1144
(D.C.
Cir.
2011).

42. Sample
Statutory
Requirement:
CFTC
Costs
and
benefits
(1)
In
general
Before
promulga3ng
a
regula3on
under
this
chapter
or
issuing
an
order
(except
as
provided
in
paragraph
(3)),
the
Commission
shall
consider
the
costs
and
benefits
of
the
ac3on
of
the
Commission.
(2)
Considera>ons
The
costs
and
benefits
of
the
proposed
Commission
ac3on
shall
be
evaluated
in
light
of—
(A)
considera3ons
of
protec3on
of
market
par3cipants
and
the
public;
(B)
considera3ons
of
the
efficiency,
compe33veness,
and
financial
integrity
of
futures
markets;
(C)
considera3ons
of
price
discovery;
(D)
considera3ons
of
sound
risk
management
prac3ces;
and
(E)
other
public
interest
considera3ons.
7
U.S.C.
§
19(a).

43. Judicial
Assessment
of
CFTC’s
Economic
Analysis
.
.
.
whether
the
benefits
of
the
Final
Rule
outweigh
its
costs
is
within
the
sound
discre3on
of
the
agency.
The
agency
must
only
show
the
Court
that
it
considered
and
evaluated
the
costs
and
benefits
as
it
was
required
to
do
by
statute.
.
.
.
The
CFTC
fulfilled
its
obliga3on
under
the
CEA
to
consider
the
costs
and
benefits
of
its
proposed
rule.
ICI
v.
CFTC,
(D.D.C.
2012).

44. Inspector
General’s
Assessment
of
CFTC’s
Economic
Analysis
We
recognize
that
cost-­‐benefit
analysis
does
not
possess
anywhere
near
the
exac3tude
of,
say,
calculus,
but
it
does
provide
structure
for
evalua3on.
A
more
robust
process
is
clearly
permiJed
under
the
cost-­‐
benefit
guidance
issued
by
the
Office
of
General
Counsel
and
the
Office
of
Chief
Economist,
and
we
believe
a
more
robust
approach
would
be
desirable,
with
greater
input
from
the
Office
of
Chief
Economist.
Office
of
Inspector
General,
CFTC,
An
Inves3ga3on
Regarding
Cost-­‐Benefit
Analyses
Performed
by
the
Commodity
Futures
Trading
Commission
in
Connec3on
with
Rulemakings
Undertaken
Pursuant
to
the
Dodd-­‐
Frank
Act
(Apr.
15,
2011)

45. Sample
Statutory
Requirement:
CFPB
STANDARDS
FOR
RULEMAKING.—In
prescribing
a
rule
under
the
Federal
consumer
financial
laws—
(A)
the
Bureau
shall
consider—
(i) the
poten3al
benefits
and
costs
to
consumers
and
covered
persons,
including
the
poten3al
reduc3on
of
access
by
consumers
to
consumer
financial
products
or
services
resul3ng
from
such
rule;
and
(ii) the
impact
of
proposed
rules
on
covered
persons,
as
described
in
sec3on
1026,
and
the
impact
on
consumers
in
rural
areas;
Dodd-­‐Frank
§
1022(b)(2)
[12
U.S.C.
§
5512
(b)(2)].

46.
GAO’s
Assessment
of
Federal
Financial
Regulators’
Economic
Analysis
By
taking
steps
to
more
fully
incorporate
OMB’s
guidelines
in
their
rulemaking
policies
and
procedures,
federal
financial
regulators
could
enhance
the
rigor
and
transparency
of
their
regulatory
analyses.
By
taking
such
ac3on,
regulators
could
demonstrate
the
ra3onale
behind
their
regulatory
decisions
and
ensure
that
the
alterna3ves
they
have
chosen
are
in
fact
the
most
cost-­‐beneficial
op3ons.
Government
Accountability
Office,
Dodd-­‐Frank
Act
Regula3ons:
Implementa3on
Could
Benefit
from
Addi3onal
Analyses
and
Coordina3on
(Nov.
2011),
at
37.

47. Oversight
Op3on:
Bring
in
Reinforcements
• An
agency’s
inspector
general
can
take
a
look
at
how
the
agency
is
making
its
rules,
se€ng
its
priori3es,
etc.
• The
GAO
can
look
at
how
well
agencies
are
conduc3ng
and
coordina3ng
analysis,
par3cularly
when
a
statute
mandates
mul3ple,
simultaneous
rulemakings
• You
can
encourage
an
independent
regulatory
agency
to
bring
in
the
OMB
for
consulta3on

48. Regulatory
Flexibility
Act
• Requires
agencies
to
analyze
the
effects
of
their
rules
on
small
en33es
and
look
for
ways
to
minimize
the
burden
on
small
en33es
• Doesn’t
apply
to
rules
that
are
issued
as
final
without
a
proposal
• Agency
either
has
to:
v
cer3fy,
aPer
a
threshold
analysis,
that
a
rule
will
not
have
a
significant
economic
impact
on
a
substan3al
number
of
small
en33es,
or
v
complete
and
publish
in
the
Federal
Register
an
Ini3al
Regulatory
Flexibility
Analysis
(IRFA)
and—if
it
s3ll
can’t
cer3fy—a
Final
Regulatory
Flexibility
Analysis
(FRFA)
• Chief
Counsel
for
Advocacy
at
the
Small
Business
Administra3on
receives
a
copy
of
these
analyses
and
monitors
compliance
with
the
Act
• Public
has
opportunity
to
comment
• OSHA,
EPA
and
CFPB
have
to
form
SBREFA
panels,
which
formalize
outreach
to
small
en33es
• Requires
agencies
to
review
rules
with
significant
impact
within
10
years
• Allows
for
judicial
review

49. Sample
Reg
Flex
Cer3fica3on
V.
Regulatory
Flexibility
Act
The
Council
cer3fies
that
this
final
rule
will
not
have
a
significant
economic
impact
on
a
substan3al
number
of
small
en33es.
The
economic
impact
of
this
rule
is
not
expected
to
be
significant.
The
final
rule
would
apply
only
to
nonbank
financial
companies
that
could
pose
a
threat
to
the
financial
stability
of
the
United
States.
Size
is
an
important
factor,
although
not
the
exclusive
factor,
in
assessing
whether
a
nonbank
financial
company
could
pose
a
threat
to
financial
stability.
The
Council
expects
that
few,
if
any,
small
companies
(as
defined
for
purposes
of
the
Small
Business
Act)
could
pose
a
threat
to
financial
stability.
Therefore,
the
Council
does
not
expect
the
rule
to
directly
affect
a
substan3al
number
of
small
en33es.
Accordingly,
a
regulatory
flexibility
analysis
under
the
Regulatory
Flexibility
Act
(5
U.S.C.
601-­‐612)
is
not
required.
FSOC,
Authority
to
Require
Supervision
and
Regula3on
of
Certain
Nonbank
Financial
Companies,
77
FR
21637
(Apr.
11,
2012).

50. Oversight
Op3on:
Work
with
the
SBA
• The
SBA’s
Office
of
Example:
Advocacy
weighed
in
on
CFPB’s
mortgage
rules:
Advocacy
works
on
ensuring
that
small
“The
CFPB
asserted
that
loan
en33es
are
taken
into
performance,
as
measured
by
the
delinquency
rate,
was
an
appropriate
account
in
the
metric
to
evaluate
whether
a
rulemaking
process
consumer
had
the
ability
to
repay
those
loans
at
the
3me
the
loan
was
• The
Office
also
assists
made.
Advocacy
ques3oned
that
in
the
review
of
asser3on
because
a
consumer’s
exis3ng
regula3ons
to
circumstances
may
have
changed
aPer
a
loan
was
made.”
minimize
regulatory
-­‐Office
of
Advocacy,
SBA,
Report
on
the
burdens
Regulatory
Flexibility
Act,
FY
2012,
at
23.

51. Oversight
Op3on:
Ask
Ques3ons
about
Paperwork
Reduc3on
Act
Analysis
• Agencies
have
to
es3mate
burdens
of
and
jus3fy
collec3ons
of
informa3on.
• Agencies
are
supposed
jus3fy
their
informa3on
collec3ons.
• OIRA
reviews
and
approves
collec3ons
before
they
take
effect
and
every
3
years
thereaPer.
• No
obliga3on
to
comply
with
unapproved
collec3on
of
informa3on.

52. Oversight
Op3on:
Ask
Ques3ons
About
Unfunded
Mandates
Reform
Act
Analysis
• Requires
analysis
of
“major”
regula3ons
(mandate
exceeding
$100
million
annually)
• Focus
is
on
costs
imposed
on
non-­‐federal
governmental
bodies
and
private
sector
• Required
analysis
includes
qualita3ve
and
quan3ta3ve
analysis
of
costs
and
benefits
and
considera3on
of
alterna3ves
• Requirement
to
choose
or
explain
why
not
choosing
least
burdensome
alterna3ve

53. Oversight
Op3on:
Congressional
Review
Act
• Members
can
introduce
a
resolu3on
to
disapprove
a
final
rule
within
60
days
of
receiving
it.
• If
President
vetoes
the
resolu3on,
2/3
majority
is
needed
in
both
houses.
• Has
only
been
used
successfully
once:
2001
disapproval
of
an
OSHA
rule

54. Judicial
Review
q Legal
challenge
can
be
based
on
failure
to
follow
APA
process
v Agency
ac3ons
must
have
sufficient
factual
support
in
the
record
v Agency
ac3ons
must
not
be
arbitrary
or
capricious
v Agency
must
have
no3fied
the
public
and
considered
public
comments
q If
an
agency
used
the
good
cause
excep3on
not
to
comply
with
standard
APA
procedures,
this
decision
can
be
challenged
in
court
q The
quality
of
the
agency’s
analysis
can
be
challenged
(although
EO
12866
is
not
judicially
enforceable)
q Courts
employ
a
deferen3al
review
standard

55. Oversight
Op3on:
File
An
Amicus
Brief
STATEMENT
OF
INTEREST
As
the
United
States
Senators
who
were
the
authors
and
sponsors
of
Sec3on
1504
(hereinaPer
“the
Cardin-­‐Lugar
Amendment”)
of
the
Dodd-­‐Frank
Wall
Street
Reform
and
Consumer
Protec3on
Act
(P.L.
111-­‐203,
July
21,
2010
(hereinaPer
the
“Dodd-­‐Frank
Act”),
amici
curiae
have
direct
knowledge
of
the
development
and
draPing
of
the
text
and
the
Congressional
intent
behind
the
substance
of
the
bill,
including
the
consistency
of
the
Securi3es
and
Exchange
Commission
(“S.E.C.”
or
“Commission”)
final
rule
(“Final
Rule”)
with
the
substance
and
intent
of
the
Cardin-­‐Lugar
Amendment.
2
Brief
of
Senators
Benjamin
Cardin
and
Carl
Levin
and
Former
Senator
Richard
Lugar
as
Amici
Curiae
in
Support
of
Respondent,
American
Petroleum
Ins3tute
v.
SEC,
D.C.
Cir.,
No.
12-­‐1398
(Jan.
16,
2013).

56. Oversight
Op3on:
Make
Regulators
Look
Back
• Ask
regulators
to
tell
you
how
a
rule
is
working
• This
works
best
when
you
have
goJen
them
to
build
success
metrics
into
the
regula3on.
Otherwise,
they
will
be
tempted
to
select
metrics
that
show
success.
• President
Obama
issued
an
execu3ve
order
calling
on
regulators
to
look
back.

57. An
Example
of
a
Built-­‐In
Look
Back
And
in
most
respects
this
rule
is
consistent
with
the
desire
to
be
careful,
thoughlul
and
data
driven.
Most
importantly,
we
build
into
the
rulemaking,
aPer
the
regulatory
structure
for
security-­‐based
swaps
is
in
place
for
two
years,
a
comprehensive
staff
study
of
some
of
the
choices
we
are
making
today,
to
determine
whether
those
choices
are
correct
or
need
to
be
modified.
At
that
3me,
we
will
have
the
benefit
of
massive
amounts
of
addi3onal
data,
a
more
developed
regulatory
infrastructure,
and
several
years
of
agency
exper3se
in
regula3ng
and
overseeing
these
markets.
The
Commission
will
be
in
a
far
stronger
posi3on
to
determine
whether
the
lines
we
draw
today-­‐-­‐including
the
de
minimis
level
for
determining
whether
one
is
a
dealer,
and
the
factors
used
to
determine
whether
one
is
a
dealer
or
major
security-­‐based
swap
par3cipant—should
be
modified
in
light
of
a
more
comprehensive
understanding
of
the
market.
Importantly,
it
should
be
noted,
the
study
doesn’t
predetermine
the
ul3mate
outcome
of
these
choices,
but
merely
allows
that
more
comprehensive
data
and
analysis
will
guide
any
decisions
the
Commission
may
make
to
modify
or
refine
the
defini3ons
we
are
adop3ng
today.
Statement
at
SEC
Open
Mee3ng:
Defining
Swaps-­‐Related
Terms,
by
Commissioner
Daniel
M.
Gallagher,
on
April
18,
2012

58. Where
to
Look?
• Agency
Websites
(for
example,
hJp://www.cPc.gov/index.htm)
• Regula3ons.gov
hJp://www.regula3ons.gov/#!home;tab=search
• Federal
Register
hJps://www.federalregister.gov/ar3cles/search
• OpenRegs.com
hJp://openregs.com/
• OMB’s
OIRA
Website
hJp://www.reginfo.gov/public/
• GAO’s
CRA
website
hJp://www.gao.gov/legal/congressact/fedrule.html

59. Oversight
Op3on:
General
Monitoring
q Direct
involvement
in
the
rulemaking
process
is
not
the
only
avenue
for
affec3ng
it.
q Other
op3ons
include
oversight
hearings,
briefing
requests,
leJers,
appropria3ons
riders.
q These
are
blunt
instruments,
but
can
be
effec3ve
in
le€ng
regulators
know
someone
is
paying
aJen3on.

60.
More
Ques3ons?