Senator Elizabeth Warren (D-MA) argued that “our rulemaking process is broken from start to finish.” Senator Warren\u00a0blamed “regulatory capture \u2013 the [corporate] capture of agencies as they write the rules” – for “undue industry influence.”<\/p>\n
In a speech before the Regulatory Capture Forum\u00a0of the Administrative Conference of the Unites States, Senator Warren recommended five\u00a0principles to “balance the scales” between Main Street and Wall Street interests:<\/p>\n
Senator Warren\u00a0concluded saying: “reforms must address the central problem \u2013\u00a0a tilted playing field that benefits the rich and powerful.”<\/p>\n
Lofchie Comment: Senator Warren’s\u00a0populist rhetoric\u00a0obscures how problematic her\u00a0policy and process recommendations are as a practical matter.\u00a0Her recommendations\u00a0represent oversimplified answers to complex market issues and this latest speech demonstrates an increasing\u00a0tendency toward\u00a0stifling valuable dissent and demonizing opponents. Here is a breakdown:<\/p>\n
The Public Interest and Its\u00a0Advocates.<\/em>\u00a0What precisely is this thing called the “Public Interest,” and who are the proper “Advocates” for it? The implication of Senator Warren’s remarks is that there is some singular viewpoint that may be defined as the “Public Interest” and that the Senator is confident of her ability to discern it. A contrary view is that there are differing positions as to what constitutes the “Public Interest,” and that at least some of those who advocate for it, may be mistaken in their beliefs that they know what is beneficial for all. This is not an idle debate. Is it so easy to determine\u00a0what is in the “Public Interest” with respect to, say, the central clearing of swaps or international trade?<\/p>\n
In the controversy around the proposed imposition of a broad set of position limits on energy products, it is\u00a0reasonable to conclude\u00a0(based on an understanding of energy markets, economics and regulation) that the imposition of such limits seems like a wasteful government project that will impose significant costs on the economy but not produce any material benefit (because if someone were to “withhold” oil from the market, someone else could simply produce more). The Senator believes the opposite. She\u00a0supports the adoption of a new and complicated set of position limits regulations.\u00a0What is new in the debate is that the Senator insists now that to be against position limits regulation is to be against the “Public Interest” which the Senator is not only able to discern, but whose advocates she can identify.<\/p>\n
As to the debate over\u00a0free trade,\u00a0Senator Warren\u00a0denounced President Obama<\/span><\/u><\/a>\u00a0over his\u00a0support of the\u00a0Trans-Pacific\u00a0Partnership trade treaty.\u00a0(As the footnotes\u00a0in her letter\u00a0demonstrate, it appears that the Senator’s position was taken in response to the President’s criticism of her.)\u00a0It is not odd that there should be a disagreement (political or otherwise) between the President and\u00a0a Senator; disagreements between knowledgeable people are to be expected. What should not be expected is a view that one of them\u00a0has a monopoly on the identification of the “Public Interest.”<\/p>\n
The Complexity of Rules.\u00a0<\/em>It is easy to agree with Senator Warren’s\u00a0simplistic statement that\u00a0rules are too complicated. Here is\u00a0a test anyone can\u00a0take: (i) go to a search engine, and (ii) run a search on the phrase, “fiduciary rule” along with “complicated.” So what is one to make of the fact that Senator Warren is a great advocate for that\u00a0“fiduciary rule” proposed by the Department of Labor.\u00a0This is to say nothing of her advocacy of Dodd-Frank, which is\u00a0something of a nightmarish maze\u00a0of complexity at 2,000 pages of ordinary text, generating hundreds of thousands of pages of rules.<\/p>\n
Delays in Rulemaking.\u00a0<\/em>The Senator complains that the regulatory agencies are failing to meet Congressional deadlines for the adoption of required rules.\u00a0Rather than allowing\u00a0advocates of the “Public Interest” to sue regulators for failing to meet Congressional deadlines, Senator Warren might consider filing suit against Congress for setting\u00a0fantasy deadlines. As she noted in her remarks, Dodd-Frank required the adoption of hundreds of interrelated rules,\u00a0many of them within a\u00a0one-year deadline.\u00a0As many stated at the time, there\u00a0was simply no way that this schedule could\u00a0ever have been met \u2013\u00a0and it was not.\u00a0The CFTC, which rushed to adopt rules, still is\u00a0nowhere nearly done,\u00a0and it has been forced to issue numerous “no-action” letters to correct mistakes in its rulemaking.\u00a0Senator Warren might be on more solid ground if she would advocate that Congress be prevented from requiring any more rules on a given topic until its\u00a0pre-existing rule requirements have been met. At least that might\u00a0encourage Congress to prioritize.<\/p>\n
Two-Step Rulemaking Process.\u00a0<\/em>The Senator seems to object to the reality that regulated industries\u00a0comment on rules that apply to them, and also that different companies will make different comments.\u00a0When Congress adopts a 2,000-page statute that requires 100,000 pages of rules, the rules are not “simple” to create,\u00a0and it really does matter what the rules require.\u00a0The notion that somehow the 2,000 pages of statute may be turned by the regulators into rules that accurately reflect\u00a0what Congress would have intended, without any\u00a0forum for discussion, is wishful thinking.<\/p>\n
Departing Executives.\u00a0<\/em>As to the Senator’s suggestion that companies\u00a0should not allow departing executives to collect compensation that they would have been paid had they not gone into government, the obvious effect of this is that it discourages qualified people from entering government. Given that such individuals are often taking very significant pay cuts, and uprooting their families, it is a little puzzling why the Senator would want to make it still more costly and less encouraging for qualified people to enter government service rather than find other ways to address potential conflicts concerns. Law firms, for example, often allow their partners to quit early and to enter government without forfeiting their pensions.\u00a0Government should be trying to encourage knowledgeable experts to offer their services on behalf of the “Public Interest.” Notwithstanding legitimate arguments to the contrary, the Senator’s\u00a0broad prescription is simplistic and problematic.<\/p>\n
Transparency. M<\/em>any of the Senator’s\u00a0recommendations\u00a0on transparency simply would have the effect, and are actually intended to have the effect, of discouraging those who work in heavily regulated industries from talking to the government. What, after all, does it mean to say that businesses should turn over all their data to the government before they comment?\u00a0How seriously should they take the assertion that company\u00a0data, once online, would be anonymous?<\/p>\n
The Importance of Discussion.\u00a0<\/em>The Senator’s recent personal attacks on the ethics of those in academia and government\u00a0who dissent from her views are in line with\u00a0the partisan idea of framing her every position exclusively as in the “Public\u00a0Interest.”\u00a0Rather than championing her cause with arguments on the merits, the Senator is\u00a0increasingly\u00a0attempting\u00a0to stifle legitimate points of\u00a0view on complex issues with exclusionary rhetoric and public criticism of the ethics of the opposition. The Senator’s recommendation that the government’s voice\u00a0should be further amplified by paid “advocates” of the “Public Interest”\u00a0reflects a world view\u00a0in which\u00a0the influence of private voices in opposition\u00a0is small, but that of the government’s is like the Leviathan incarnate. The Senator’s concerns\u00a0about the disproportionate voice owned by “big” business\u00a0should be balanced by like concerns for the disproportionate voice owned by “big” government.<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"
Senator Elizabeth Warren (D-MA) argued that “our rulemaking process is broken from start to finish.” Senator Warren\u00a0blamed “regulatory capture \u2013 the [corporate] capture of agencies as they write the rules” – for “undue industry influence.” In a speech before the … Continue reading