April 17, 2012
Jacqueline C. McCabe
, Executive Director for Research of the
Committee on Capital Markets Regulation
testified before the TARP, Financial Services and Bailouts of the House Oversight and Government Reform Committee today, warning that inadequate cost benefit analysis by regulators rulemaking under Dodd-Frank risks successful legal challenges and/or litigation delays which will cause economic harm.
Ms. McCabe recapped a recent study by the Committee on cost-benefit analysis in 192 orders, proposed rules and final rules issued by 15 government agencies pursuant to Dodd-Frank:
"…we believe many of the rules under Dodd-Frank could be subject to successful challenge in court. It would be an unfortunate outcome if, after the Dodd-Frank rulemaking process has run its course for several years, important rules are invalidated because of inadequate analysis. Even if such rules are not eventually invalidated, prolonged uncertainty around their fate threatens to hamper economic activity."
With regard to the recently issued SEC Internal Guidance on Economic Analysis in SEC Rulemakings she said that, "We are pleased that the SEC has recognized the need to consider the overall economic impact of its rules, including both SEC rulemaking pursuant to Congressional mandates, as well as entirely discretionary SEC rulemaking... The SEC acknowledges that this approach will provide the most complete evaluation of a rule's economic effect, particularly because in many cases it is difficult to distinguish between mandatory and discretionary aspects of a rule."
She also addressed recent CFTC Internal Guidance, which is contrary to the SEC's Internal Guidance, "The SEC's approach to this issue of discretion stands in contrast to that taken by the CFTC. In staff guidance issued by the CFTC General Counsel and Chief Economist last May, the CFTC advised its staff that if rulemaking provisions under Dodd-Frank 'merely replicate the statutory provisions the Commission is required to promulgate without the exercise of discretion, then cost-benefit considerations may not be a factor in the promulgation of the rule.'"