On February 8th, Public Citizen, the National Resources Defense Council, and the Communications Workers of America sued the federal government, alleging that the President exceeded his constitutional authority and violated the Administrative Procedure Act in issuing Executive Order 13771 on Reducing Regulation. The Order directs “executive” agencies to identify for repeal two existing regulations for every new regulation proposed or issued and to ensure that the net costs of any new regulations in combination with repealed regulations not exceed zero. The suit argues that the Executive Order distorts the administrative process by requiring administrative agencies to focus exclusively on costs as opposed to the benefits of regulations, and that only Congress has the authority to direct agencies to prioritize reducing costs.
By Alexander Dill
Clearing Corporation Charitable Foundation Practitioner in Residence
Last Friday, February 3, nearly two weeks into his term, President Trump issued a directive to revamp financial market regulation, aimed squarely at the Dodd-Frank Act of 2010 without naming it but also encompassing the financial regulatory framework as a whole. The directive presents a vague framework in the form of several “core principles” that dovetail with Congressional Republicans’ complaints that regulatory burdens have crimped banks’ ability to lend, thus reducing business expansion and job growth. Among the core principles are the prevention of taxpayer-funded bailouts and the fostering of “economic growth and vibrant financial markets through more rigorous regulatory impact analysis that addresses systemic risk and market failures.”
However, Republicans’ claim flies in the face of the all-time high level of commercial and industrial lending since 2010, as pointed out by Jordan Weissman of Slate Magazine. It is possible that the true source of concern is the reduced return on equity resulting from the higher capital requirements, with historically low interest rates a contributing factor. These factors have hit banks where it hurts most – lowering profitability and depressing stock prices. If banks can return more capital to shareholders, with one estimate at $100 billion by the six largest banks due to potentially looser regulation, through buybacks and dividends, stock prices will increase. In fact, the market expected as much in its reaction to the President’s February 3 directive as bank stocks moved upward.
Professor William Birdthistle was a panelist on WTTW’s “Chicago Tonight” on February 7, 2017, for a discussion about how the Trump administration’s deregulation agenda may affect the Dodd-Frank Act and the fiduciary rule.
During the 2016 presidential campaign, candidate Donald Trump promised both to curb and to eliminate the EPA. A Florida congressman is planning to introduce legislation to abolish the agency by 2018. Going nuclear against the EPA will not be easy and the counterattacks will be fierce.
The EPA was created in 1970 by President Richard Nixon by Executive Order. It gathered into a new agency the scattered, weak environmental laws delegated to the Departments of Agriculture, then Health, Education and Welfare and Interior. Most foundational environmental laws enacted between 1970-1980 were assigned to the EPA for implementation and enforcement.
The President’s power to abolish agencies falls under government reorganization acts that trace back to the New Deal. The last one was enacted in 1977, before the Supreme Court invalidated legislative vetoes, so the current thinking is that the President must ask Congress for authority to abolish an agency. Even assuming that the current Congress grants the authority, then the fun starts. The air, hazardous waste and water pollution laws that EPA implements and enforces cannot be abolished by the Executive; the Constitution clearly grants that authority exclusively to Congress.
Does the Republican controlled Congress really want to create that level of chaos? Stay tuned.