Commissioner: New Dodd-Frank Agencies Not Following Regulatory Rules

With Democrats in control Washington has become like a bad episode of Hoarders. Rather than actually reform existing programs to make them work better, they write new laws, draw up more red tape, and create expensive new programs and agencies.

The result is a tangled up mess of a bureaucracy that not only deters good governance, but also inhibits the growth of our economy. Just as the piles of trash that invade the homes of hoarders prevent them from living a quality life, the piles of regulations coming out of Washington are depressing business activity.

One of the most visible examples of Democrats’ penchant for collecting new regulations is the myriad new rules arising from the Dodd-Frank bill. Of those new entities the Commodity Futures Trading Commission (CFTC) has potentially been the biggest offender.

“The Commission has acted like a little child, abandoning the old toy and swapping them out for the new,” said CFTC Commissioner Scott O’Malia at a conference at New York Law School.

O’Malia, one of two Republicans on the CFTC board, argues that his agency should be focused on identifying weaknesses in existing regulations, not pumping out new ones.

According to O’Malia the CFTC may not even be complying with its own standards for regulatory review for the numerous rules the Commission has been creating. In a letter to the Office of Management and Budget, O’Malia argued “the Commission has failed to carefully and precisely identify a clear baseline against which the Commission measured costs and benefits and the range of alternatives under consideration in this rule.”

The economic cost of regulations is not a purely conservative concern. The left-leaning Brookings Institute recently sent a warning to Congress about the economic impact of Dodd-Frank’s rules. “Cost-benefit analysis is a critical element of the Dodd-Frank rulemaking process, as this process will undoubtedly result in significant and fundamental changes across the financial industry which should be soundly justified.” Indeed the Brookings Institute identified 57 rules that contain no cost benefit analysis, 85 that lacked evidence for their claims, and 50 that lack a sufficiently broad economic impact of the rule.

The problem isn’t limited to Dodd-Frank. Researchers Christopher Conover of Duke University and Jerry Ellig of the Mercatus Center found similar problems with the Affordable Care Act, also known as Obamacare. “The Regulatory Impact Analyses for these regulations were seriously incomplete, often omitting significant benefits, costs or regulatory alternatives,” the researchers write. “[T]he low-quality analysis was a predictable result of the way that the administration and Congress chose to manage the regulatory process.”

The management style the researchers are referring to is the rushed atmosphere that has forced regulatory agencies to keep up with the hundreds of new rules contained in Democrats’ new legislation. The result is a breakdown in standards and a harried, less than thorough review of the rule’s impacts. Such hastily slapped together regulations pose a real threat to economic growth.

The need for cost-benefit analyses is not some mere technicality, it is of core importance. After all, regulations will mean little if they choke the life out of the section of the economy they were meant to provide order to.

Rather than simply collect new regulations like a compulsive hoarder with an unwillingness or inability to discard old and useless rules, Democrats insist on acquiring more and more, creating an ever more bloated Washington. Just as a hoarder must address the psychological aspect of their compulsive behavior, Democrats must come to understand the harms of big government.

That process begins by facing up to the economic impacts of their addiction to new rules.