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Sachs: Don't undercut consumer financial protection agencies' independence...

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Posted: Monday, November 26, 2012 12:00 am

Imagine if important government agencies, purposely designed by Congress to be insulated from political pressure, suddenly had to bend to White House wishes.

Campaign contributors might then try to influence Nuclear Regulatory Commission decisions on safety standards for aging nuclear plants. Big Wall Street donors might have a backdoor route to kill Securities and Exchange Commission regulations on stock fraud.

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Today, these scenarios are coming closer to reality. And surprisingly, Sen. Mark Warner, who has supported creation of independent agencies in the past, is leading the charge to undercut their independence.

Warner is one of three co-sponsors of a new bill, the Independent Agency Regulatory Analysis Act, which would weaken the independence of the NRC, the SEC, the Federal Communications Commission, the Federal Election Commission, the Consumer Product Safety Commission and a dozen other federal agencies. The new bill might come to a Senate vote before the end of the year.

Congress intentionally created these non-Cabinet agencies with firewalls against political manipulation by the White House and executive branch officials. The president cannot dictate day-to-day policies at these agencies, and they are usually headed by bipartisan, multimember commissions to provide insulation from presidential politics.

The reason for the firewalls is simple: These agencies are charged with making crucial life-and-death decisions, or they affect major industries and economic sectors. Congress wanted these agencies to make decisions on the basis of the facts and their own expertise, not on the wishes of White House political staff or even the president himself. When the Federal Election Commission drafts new rules for political campaigns, for example, it needs to be shielded from pressure from the rest of the executive branch.

Now, for the first time, the Warner bill would give the White House the authority to review proposed regulations by these independent agencies. It also would allow the White House to require these independent agencies to conduct cost-benefit analysis on proposed regulations.

Warner says the bill is about transparency, good government and saving money.

But the problem is that this seemingly obscure bill overrides dozens of earlier laws that created these agencies and would limit the decision-making freedom of agencies charged with protecting the financial system, public safety and fair commerce.

History shows exactly how presidents of both parties would use the new review authority under the bill. For decades, the White House has had this same review authority over the larger piece of the federal government that does not comprise independent agencies. The record shows that the White House has often used this authority to block or undercut agency decisions, with little transparency or public involvement.

For example, almost two years ago, the Occupational Safety and Health Administration proposed a rule to protect construction workers engaged in sandblasting or jackhammering against silica dust that infects the lungs. That dust kills hundreds of workers each year, according to federal health experts. Under heavy pressure from the construction industry, however, the White House office that reviews agency rules has blocked the agency from moving forward, to the detriment of workers.

Or consider the Environmental Protection Agency's 2010 proposal to publish a short list of chemicals of concern, including the hormone-disrupting chemical bisphenol A (BPA). The agency was not regulating the chemicals; it simply wanted to alert the public to potential risks. Nonetheless, the White House has sat on the EPA proposal for two and a half years, with the support of chemical industry trade associations, even though the White House review is supposed to occur within 90 days.

While the new bill aims for transparency, we're likely to get a black hole of decision-making instead. Far from improving government, the bill will make important government decisions subject to endless internal review and closed-door meetings with industry lobbyists.

The newest independent agency, the Consumer Financial Protection Bureau, would become one of the prime targets of this behind-the-scenes lobbying. Currently, the CFPB is working on a proposal that would make mortgage disclosure forms easier for consumers to understand. But if the Warner bill passes, this rule and others could be delayed for months or years.

Because the bill threatens the independence of the CFPB and other key financial agencies, Federal Reserve Chairman Ben Bernanke and SEC Chairman Mary Schapiro strongly oppose it. As they wrote in an Oct. 26 letter, the bill would "interfere with our ability to promulgate rules critical to our missions in a timely manner and would likely result in unnecessary and unwarranted litigation in connection with our rules."

Warner is working with co-sponsor Susan Collins of Maine to pass the bill. Three years ago, Sen. Collins stated in a hearing that "the whole reason that Congress creates independent regulatory agencies is to insulate them from administration policies, whether it's a Democratic or Republican administration."

She added that "if you bring these independent agencies within the regulatory purview" of the White House, "you defeat the whole purpose of having them be independent agencies."

She was right then. She - and Warner - are wrong now.

Noah M. Sachs is a professor at the University of Richmond School of Law and Member Scholar, Center for Progressive Reform. Contact him at nsachs@richmond.edu or (804) 289-8555.

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  • Read more of Charles F. Bryan Jr.’s columns here

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