By Sarah N. Lynch
WASHINGTON May 17 A divided U.S. House of
Representatives on Friday passed a Republican-sponsored bill
that would force federal securities regulators to conduct more
economic analysis before adopting rules for Wall Street.
The bill, which is not expected to make it to the
Democrat-controlled U.S. Senate floor for a vote, passed largely
along party lines in a 235-161 vote.
Republicans backed the measure as reducing red tape for
business. Most Democrats opposed it, saying it would hinder the
Securities and Exchange Commission from completing rule-writing
required by the 2010 Dodd-Frank Wall Street reform law.
"At a time when new regulation after new regulation is being
proposed by the Obama Administration, it is critical that we
restore some semblance of order to the regulatory process and
ensure that our nation's small businesses do not continue to
drown in a sea of red tape," said New Jersey Republican Scott
Garrett, the author of the bill, in remarks on the floor before
"This is a common sense, pragmatic approach to our
rulemaking process that should have been in place all along."
The bill garnered a lot of attention this week after
President Barack Obama issued a statement opposing the measure
and SEC Chair Mary Jo White warned it would "create uncertainty"
for the market and put the agency at risk of facing constant
U.S. law already requires the SEC to consider the impact
regulations would have on competition, efficiency and capital
formation. This bill would also call for more due diligence in
studying rules before they are adopted, and require the agency
to conduct follow-up studies to make sure rules are having the
Also, the SEC would need to review all existing regulations
every five years to determine whether they are out of date.
House Republicans successfully added an amendment to the
bill that would require other rulemaking bodies under the SEC's
supervision, such as the Public Company Accounting Oversight
Board and the Financial Industry Regulatory Authority, to abide
by the same cost-benefit requirements as the SEC.
The provisions in the bill are "consistent with the
Republican efforts to bog down regulations in an effort to
protect Wall Street," said House Financial Services Ranking
Member Maxine Waters, in an interview with Reuters after the
"We think it is foolhardy," she said, adding that she is
grateful to "have the Senate there to help protect" against
making the bill law.
Republicans and industry groups have been using the issue of
cost-benefit analysis to defeat or slow rules they oppose.
In recent years, trade associations and business groups have
convinced federal courts to overturn SEC rules by arguing the
agency had failed to properly weigh costs and benefits.
In 2011, the U.S. Chamber of Commerce and Business
Roundtable won a legal bid to overturn a rule stemming from the
2010 Dodd-Frank Wall Street reform law that made it easier for
shareholders to nominate directors to corporate boards.
House passage of the latest bill comes as the SEC has been
battling business groups in court over two more Dodd-Frank
Oral arguments in the challenge of one rule that would force
oil, gas and mining companies to disclose their payments to
foreign governments are tentatively slated for June 7.
The SEC last year sought to bullet-proof its rules by
beefing up its economic analysis. It drafted new guidance
calling for its staff to rely more heavily on economists and to
provide stronger justifications for its rules.
Since then, there has been a notable change in tone at the
SEC, both in the pace of rulemaking and also in the attention it
has paid to analyzing the impacts of its rules.
In 2011, the Obama administration issued an executive order
calling on federal independent agencies to periodically review
regulations to ensure they are not outdated or burdensome.
Republicans on Friday said they were hard-pressed to
understand why the Obama administration was opposing the
cost-benefit bill, saying it was meant to codify into law both
the executive order and prior promises the SEC had made to
Congress to beef up its economic analysis.
"The complaints from the other side of the aisle seem
absolutely bizarre," said North Carolina Republican Patrick
Every Republican in the House voted to pass the bill on
Friday, while 17 Democrats voted for the bill.
Waters said the Democrats who did not vote along party lines
were either moderate "blue dogs" or newer members who are still
"uneasy, uncertain in their districts and trying to find their