WASHINGTON – Legislation cleared the House on Friday that would place stricter requirements on the federal agency overseeing Wall Street to assess the costs and benefits of its regulations before they are issued.
The bill passed on a 235-161 vote mostly on party lines. It was the latest salvo against the Securities and Exchange Commission by House Republicans, who opposed the 2010 financial overhaul legislation expanding the SEC’s powers and have resisted increasing its budget. Congress enacted the regulatory overhaul in response to the 2008 financial crisis with an eye to preventing another meltdown.
Friday’s bill isn’t expected to get a vote in the Senate. It would require the SEC to refrain from adopting rules unless it determines that the benefits of the rules outweigh the costs. The agency currently conducts cost-benefit analyses of regulations prior to issuing them. But the bill would make the process more extensive and detailed.
In addition, the SEC would be required to review all its existing rules to determine if they impose excessive costs or administrative burdens on the companies regulated by the agency.
Democratic lawmakers said that would force the agency to review every rule put into effect since its creation during the Great Depression, with no additional funding for SEC staff.
The bill seeks to hinder the SEC’s ability to write new rules under the 2010 financial overhaul and to shield Wall Street from regulation, the Democrats charged.
The legislation “is aimed squarely at undermining Wall Street’s cop on the block,” Rep. Maxine Waters of California, the senior Democrat on the House Financial Services Committee, said on the House floor before the vote. “This is dangerous; it is irresponsible. This is about protecting Wall Street.”
In addition to tying up SEC staff resources, the requirement for more extensive and detailed cost-benefit analyses would put the agency at greater risk of being sued over each rule it adopts, the Democrats said. They said that while they support cost-benefit analyses by federal agencies, they object to imposing excessive requirements on the SEC.
The White House registered its opposition to the bill on Wednesday, saying it would add “burdensome and disruptive new procedures (that) would impede the ability of the SEC to protect investors, maintain orderly and efficient markets, and facilitate capital formation.”
SEC Chairman Mary Jo White told the financial services panel in a hearing Thursday that she is “a firm supporter of rigorous economic analysis,” which the agency has been conducting. “I do have concerns about this bill in terms of our being able to carry out our rulemaking function expeditiously, and to provide market participants with certainty,” she testified.
But Republicans insisted the change was needed to help curb runaway regulations written in Washington that hurt ordinary Americans by raising costs for businesses.
“What it is really about is kitchen-table economics,” said Rep. Jeb Hensarling, R-Texas, chairman of the Financial Services Committee.
The Republicans have long targeted the SEC by proposing legislation to weaken various provisions of the financial overhaul law. Their opposition has been galvanized in recent days with the revelations that the Internal Revenue Service gave tougher treatment to tea party and other conservative groups seeking tax-exempt status.
At Thursday’s hearing, committee Republicans seized on the episode to tell White that if the SEC adopted a rule requiring public companies to disclose political donations, as consumer and liberal groups have urged, it would be engaging in a similar abuse of power as the IRS.
The SEC is an independent regulatory agency. The IRS is a division of the Treasury Department, which is part of the Obama administration.
Among other things, the bill would require the SEC to adopt rules only after a “reasoned determination” that their benefits would outweigh their costs, to identify and assess possible alternatives to proposed rules, to gauge the potential impact of rules on investors and small business, and to periodically review existing rules to determine if they are overly burdensome, outdated or weak.
A large coalition of consumer, union and liberal groups said in a letter to House lawmakers that the bill “is transparently intended to create roadblocks in the way of passing any investor protection rule.”