Two of the more interesting provisions of Senator Richard Shelby's proposed legislation reforming the federal financial regulatory process are the creation of a council of economists composed of the Chief Economists of the SEC and CFTC and other federal financial regulators and a new standard under which federal courts will review agency regulations.
Senator Richard Shelby (R-AL), Ranking Member on the Banking Committee has introduced the Financial Regulatory Responsibility Act of 2011, which holds federal financial regulators such as the SEC and CFTC accountable for rigorous, consistent economic analysis on every new regulation they propose. The legislation would require the SEC and CFTC to provide clear justification for the regulations and determine the economic impacts of proposed rulemakings, including their effects on growth and net job creation. In addition, the legislation mandates that if a regulation’s costs outweigh its benefits, regulators are barred from promulgating it.
Under the measure, during the period beginning on the date on which a notice of final rulemaking for a regulation is published in the Federal Register and ending one year later, a person that is adversely affected or aggrieved by the regulation is entitled to bring an action in the United States Court of Appeals for the District of Columbia Circuit for judicial review of agency compliance with the requirements of section 3 of the Shelby legislation. The court may stay the effective date of the regulation or any provision thereof.
If the court finds that an agency has not complied with the requirements of section 3, the court must vacate the subject regulation, unless the agency can show by clear and convincing evidence that vacating the regulation would result in irreparable harm.
The legislation would establish the Chief Economists Council to meet at least quarterly and be composed of the Chief Economist of each federal financial regulator. The members of the Council will select the first chairperson of the Council. Thereafter the position of Chairperson must rotate annually among the members of the Council.
The Council must submit an annual report to Congress on the benefits and costs of regulations adopted by the agencies during the past year, the regulatory actions planned by the agencies for the upcoming year, and the cumulative effect of the existing regulations of the agencies on economic activity, innovation, international competitiveness of entities regulated by the agencies, and net job creation. The Council must also report on the training and qualifications of the persons who prepared the cost-benefit analyses of each agency during the past year and the sufficiency of the resources available to the Chief Economists during the past year for the conduct of the activities required by the Act. Finally, the Council must make recommendations for legislative or regulatory action to enhance the efficiency and effectiveness of financial regulation in the United States.