Dodd-Frank's cost-benefit analysis problem
We've suggested that opponents of Dodd-Frank have identified a powerful legal weapon in their fight to overturn or emasculate the law: A legal claim that the SEC failed to perform adequate cost benefit analyses as to the effects of the many provisions.
The recent federal appellate court ruling that the controversial proxy access rules were invalid because of a lack of adequate analysis was the gift that just might keep on giving for opponents of the law. Already, we're seeing other regulations challenged on this basis.
How powerful will line of argument be? A nonpartisan group called the Committee on Capital Markets Regulation has warned Congress of its "deep concern about the inadequacy of cost-benefit analysis" that its research has identified in proposed rulemaking under the Dodd-Frank, Wall Street Reform and Consumer Protection Act.
The group has found widespread inadequacies in its review of the cost-benefit analysis provisions contained in 192 proposed and final rules under Dodd-Frank. Specifically, the CCMR found that:
- Over a quarter of the 192 rules have no cost-benefit analysis at all.
- Over a third have entirely non-quantitative cost-benefit analysis.
- The majority of the 50 rules that do contain quantitative analysis limit it to administrative and similar costs, but ignore the Rule's expected broader economic impact.
The director of the group says: "A recent D.C. Federal Appeals Court ruling that such rulemaking is not subject to direct appellate review means that the legal challenges of proposed Rules will subject them to a long, tortuous path through the courts, beginning at the District Court level. And that will result in the kind of prolonged uncertainty that can cripple economic activity."
- here's the release
The war on Dodd-Frank heats up