The New York Times: Republicans Assail Regulator on Costs of New Rules

Mar 14, 2011
In The News

Republican lawmakers are stepping up their criticism on federal regulators charged with writing new rules for Wall Street, saying the agencies are ignoring the costs of the rules.

Representative Frank D. Lucas, chairman of the House Agriculture Committee, has asked the Commodity Futures Trading Commission’s internal watchdog to study how the agency calculates the costs of new regulations it is writing for the derivatives industry. Mr. Lucas, Republican of Oklahoma, recently complained in a letter to the commission’s inspector general that the agency “has taken a vague and minimalist approach” to conducting cost-benefit analyses on the rules.

The agency has spent months putting together dozens of new regulations, including proposals that would require derivatives to be traded on regulated exchanges. The rules are part of the Dodd-Frank financial regulatory law.

Mr. Lucas and a fellow Republican, Representative K. Michael Conaway of Texas, asked the inspector general, Roy Lavik, to review the “accuracy” of the commission’s cost-benefit calculations.

This is the latest in a long line of Republican complaints about the commission. Conservative lawmakers have also complained that the agency is moving too fast to implement the Dodd-Frank Act and that the agency’s rules jeopardize profits on Wall Street. The Republican-led House of Representatives passed a federal spending plan in February that would cut the commission’s $168 million budget by a third.

A spokesman for the agency declined to comment. The commission’s chairman, Gary Gensler, has said his agency is following its obligations under Dodd-Frank, which requires most derivatives rules to be completed by July.

The Republican complaints echo concerns raised by derivatives industry insiders and a member of the commission, Jill Sommers. “The proposals we have issued thus far contain cursory, boilerplate cost-benefit analysis sections in which we have not attempted to quantify the costs because we are not required to do so,” Ms. Sommers said in a speech last week to the Institute of International Bankers.

Ms. Sommers, a Republican, noted that the agency was not legally required to determine whether the benefits of a new rule outweigh the costs. Under the Commodity Exchange Act, the commission need only “consider” the costs. “Clearly, when it comes to cost-benefit analyses, the commission is merely complying with the absolute minimum,” she said.

Congressmen’s Letter to Commodity Futures Trading Commission’s Inspector General

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