Rep. Scott Garrett (R-N.J.), the chairman of the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, testified at an April 25 Securities and Exchange Commission oversight hearing and advocated a “rigorous review of the costs and benefits associated with each new rule.”
Garrett said the cost-benefit measure would ensure that taxpayer dollars are not being wasted, as well as weaken the ability of regulatory agencies to implement the financial reform legislation.
“That may very well be the effect,” Garret said, according to Bloomberg. “But if you stood next to me a proponent of Dodd-Frank, they should be willing, ready and able to support legislation that would make sure you’re not wasting money in the implementation of Dodd-Frank.
Last year, following legal challenges from business groups, a federal court ruled that the SEC had not properly conducted a thorough cost-benefit analysis. Two Wall Street groups followed a similar course when they filed against the Commodity Futures Trading Commission, alleging that the agency used a flawed cost-benefit analysis in a rule to limit speculation.
“The business community has been given a new powerful tool to use against any rule-makings they dislike,” Roel Campos, a former SEC commissioner and lawyer at Locke Lord LLP in Washington, said, Bloomberg reports. “The standard will prevent the agency from being able to deal with anything that’s controversial.”
While some oppose the proposed measure, Eugene Scalia, a lawyer and son of Supreme Court Justice Antonin Scalia, said that cost-benefit analyses should be the norm.
“This shouldn’t be remarkable,” Scalia said, according to Bloomberg. “It should be normal for federal agencies to look at how costly their rules are before imposing them.”
SEC Chairwoman Mary Schapiro has testified that conducting a cost-benefit analysis is much more complicated that it sounds, adding that the benefits often reflect social change or improvements.
“Quantifying the costs is difficult but the task of quantifying benefits is very much more difficult because they are often very, very hard to put a dollar number on,” Schapiro said during an April 17 hearing, Bloomberg reports. “Our challenge is to do the best we can.”