Not ‘Deregulation,’ But Smart Regulation

Appropriately (and not surprisingly), the court's latest defender is the very lawyer responsible for many of the successful legal challenges against the SEC's and CFTC's rules.  Eugene Scalia (yes, son of that other Scalia), offers a stirring rebuke to the court's critics in today's Wall Street Journal.  Noting that the judges responsible for these decisions were appointed by Republican and Democratic presidents alike, Scalia explains that the agencies' high-profile losses are not the fault of the judges, but rather of the regulators themselves that failed to satisfy the requirements imposed by President Clinton and Congress.

His op-ed mentions the complaints of regulators, and pro-regulatory activists, who argue that procedural requires imposed by the decades-old Administrative Procedure Act and other statutes are too much for agencies to bear:

The SEC's defenders bridle at the requirement for cost-benefit analysis—it's so hard! The lament is curious. Financial regulators should be particularly attentive to the financial consequences of their actions.

... I once debated a former SEC staffer who accused business of using procedural maneuvers to defeat salutary regulations. Yet proper procedure is one of Congress's principal means of ensuring regulatory quality. The law authorizing courts to review agency rules is the Administrative Procedure Act. In court, the ends don't justify the means.

Those weak complaints call to mind some of the objections raised by law professors in response to the proposed Regulatory Accountability Act and other reforms that would require all agencies, including "independent" agencies, to undertake cost-benefit analysis and other procedures to ensure the quality of new regulations.  In a letter to the House Judiciary Committee, the professors complained that the Act would "greatly extend … the time periods necessary to complete lawful consideration of a proposed rule," and that the Act's "formalities" would invite "obstructionist tactics" that the agencies could not overcome.

This regulator-centric viewpoint reveals much of what is wrong with the Obama administration, and with the academics and activists that champion the modern tidal wave of regulations without serious consideration of their costs and benefits. If regulators think it is hard to comply with procedural statutes, then they ought to trade places for a day with the people who have to understand and comply with their regulations on a daily basis.

Governor Romney touched on this theme at last night's debate:

Regulation is essential. You can’t have a free market work if you don’t have regulation. As a businessperson, I had to have -- I need to know the regulations. I needed them there. You couldn’t have people opening up banks in their -- in their garage and making loans. I mean, you have to have regulations so that you can have an economy work. Every free economy has good regulation. At the same time, regulation can become excessive.

... And what’s happened with some of the legislation that’s been passed during the president’s term, you’ve seen regulation become excessive, and it’s hurt -- it’s hurt the economy.

"We’re not going to get rid of all regulation," Romney said. "You have to have regulation."  

But what we need, perhaps now more than ever, is smart regulation.  So let's thank the judges (and Mr. Scalia, and his colleagues) who are forcing regulators to get smarter, whether the regulators like it or not.

Adam J. White is a lawyer in Washington, D.C.