WASHINGTON (Reuters) - Republicans aiming to unhinge the Dodd-Frank financial reform legislation have turned to a new line of attack and have told the Treasury, Federal Reserve and other regulators to do more due diligence, according to a letter obtained on Thursday.
The letter raises questions about whether U.S. regulators are adequately following federal rule-making procedures such as reviewing public comments and conducting rigorous economic analyses of the rules’ impact on the industry.
A failure to abide by these guidelines has in the past forced the Securities and Exchange Commission to backtrack on numerous rules. The issue could come up again under Dodd-Frank if industry groups decide to challenge regulators for weaknesses in their rule making.
“We are concerned that regulators are not allowing adequate time for meaningful public comment on their proposed rules,” said the letter, which was addressed to Treasury Secretary Timothy Geithner and the heads of the Fed and market and banking regulators.
“We also believe that regulators are not conducting rigorous analyses of the costs and benefits of their rules and the effects those rules could have on the economy,” said the letter, signed by the Republicans on the Senate Banking Committee, which oversees the implementation of Dodd-Frank.
The letter was dated February 15 and sent the same week Republicans on the committee voiced concerns about short public comment periods and the quality of cost-benefit analyses.
The SEC has been without a chief economist for 10 months. The Commodity Futures Trading Commission, meanwhile, only just filled the chief economist spot in December following an 11-month vacancy.
“The failure to promptly fill these key positions suggests that economic analyses is not a high priority for our regulators,” Richard Shelby, the top Republican on the panel, told regulators.
SEC Chairman Mary Schapiro and CFTC Chairman Gary Gensler have assured lawmakers in a series of hearings this week that the agencies are following federal rule-making procedures and having in-house economists weigh in on the cost-benefit analyses that are required.
“We are absolutely trying to grow” the number of economists on staff, which currently totals 30, Schapiro said, adding that the agency is aggressively recruiting a chief economist.
Gensler, in a House Financial Services hearing earlier this week, told lawmakers the CFTC is “mandated” to perform a cost-benefit analysis for each of its rules and is complying with the law.
But Republicans on the Hill are not the only ones who have been sounding the alarm bell about federal rule-making procedures. Republican commissioners at the SEC and CFTC have also raised serious concerns as well.
SEC Commissioner Kathleen Casey, in a speech earlier this month, said the rushed rule making leaves cost-benefit analysis “severely limited” and may make the SEC more susceptible to legal challenges down the road.
Although it is still to early to know if the agencies will face any legal battles, some prominent companies and business groups have already signaled concerns.
Terry Duffy, the executive chairman of CME Group Inc, told lawmakers on Tuesday he has found fundamental flaws with the CFTC’s rule making.
“In our view, many of the proposals are inconsistent with the Dodd-Frank Act, not required by the Dodd-Frank Act, and/or impose burdens on the industry that require an increase in CFTC staff and expenditures that could never be justified if an adequate cost-benefit analysis had been performed,” Duffy said in prepared remarks.
Editing by Steve Orlofsky