Senator Crapo Submits Letters to SEC, CFTC and CFPB Regarding Review of Outdated Regulations
Commentary by Bob Zwirb
Senator Mike Crapo (R-ID) submitted letters to the SEC, the CFTC and the Consumer Finance Protection Bureau ("CFPB") to follow up on a discussion at the September 9, 2014 "Wall Street Reform: Assessing and Enhancing the Financial Regulatory System" hearing. The Senator questioned how the regulators planned to undertake a "meaningful review" of outdated regulations.
Senator Crapo explained in his letter that, at the hearing, the SEC, the CFTC and the CFPB (collectively, the "Agencies") agreed to commit to reviewing their rules in the way that federal banking regulators have done, as mandated by the Economic Growth and Regulatory Paperwork Reduction Act of 1996 ("EGRPRA"). In order to have a better understanding of how the Agencies intend to proceed with a review of their rules, Senator Crapo requested the following from the Agencies:
- to provide the current review process that is being undertaken to ensure that existing regulations are no longer "outdated, unnecessary, or unduly burdensome";
- to say whether they will commit to engaging in a retrospective review of their regulations, as set forth in Executive Order 13579 ("Regulation and Independent Regulatory Agencies"); and
- to say whether they will commit to conducting a retrospective review of regulations in the same fashion that prudential banking regulators are required to do under EGRPRA.
See: Senator Crapo Letter to the SEC; Senator Crapo Letter to the CFTC; Senator Crapo Letter to the CFPB.
Commentary
To be meaningful, regulatory analysis must look both forward and backward: forward, to assess the likely or possible impact of proposed rules or actions; backward, to assess the real-world impact of those rules or actions that have taken effect. The Commodity Exchange Act obliges the CFTC to do only the former - that is, to evaluate ex ante the costs and benefits of a proposed Commission action. Even here, it doesn’t do a very good job. See, e.g., Speech by CFTC Commissioner Jill Sommers Delivered before the Cadwalader Energy Conference (Oct. 11, 2012) ("I have spoken in the past of my frustration with the thoroughness of our cost-benefit analysis."), available at http://www.cftc.gov/PressRoom/SpeechesTestimony/opasommers-24.
Here, Senator Crapo is asking the CFTC to engage instead in an ex post analysis of the regulatory impact of its actions. Such regulatory impact analysis is equally important and has been going on for years at a few agencies, such as the FTC. Many people may not realize that, in the late 1990s under the leadership of former Chair William Rainer, the CFTC did attempt to engage in the type of analysis for which Senator Crapo is calling. Prior to the adoption of the Commodity Futures Modernization Act of 2000 ("CFMA"), Chair Rainer set up an internal task force to simplify the CFTC rulebook - to get rid of "outdated, unnecessary, or unduly burdensome" rules, as Senator Crapo put it. Unfortunately, the staff placed in charge of this task force was neither sympathetic to nor fluent in the cause. As a result, the CFTC rulebook didn't diminish in size but was rationalized somewhat by the impact of the CFMA. Today, the CFTC "white book," as it is known, like the IRS Code, is bigger than ever - in the "white book's" case, with the additional layers of statutory commands and rulemaking imposed by Dodd-Frank.