Like Professor Zaring, I agree that the likely outcome of a Republican-controlled House and a razor thin Democratic majority in the Senate is to shift more of the policymaking action to agencies. What I would like to pick my co-blogger’s brain on is: what influence can the newly shaken up Congress have on the regulatory process? What influence will they have?

We’ll be having our first Masters Forum of the academic year on a business law “Agenda for the Next 2 Years” tomorrow (Thursday) and Friday here at the Conglomerate. Our panel of law professors will bring their expertise in a broad range of fields – corporate law, securities, bankruptcy, tax etc. – to bear on what the new Congress and the President should focus during the 112th Congress. To frame that discussion rather than preempt it, here are a few questions and thoughts on the potential role of Congress in the administrative process.

First, here is why the questions are important: both financial reform and healthcare reform left quite a bit of work to be done by agencies. Kim Krawiec, in our Masters Forum over the summer on Dodd-Frank, counted 243 rulemakings and 67 studies required by the Act. In some ways, the Dodd-Frank was like a rough outline of a novel and now the hard work of writing is left to agencies.

Second, if the election yesterday was a backlash against big government, the politics of different regulatory reforms vary considerably. Contrast health care reform, which united the GOP in opposition, with financial reform, which garnered support from several moderate Republican senators. In other words, opposing Dodd-Frank rulemaking may bring a much different set of risks and costs than opposing health care. Who wants to give a future election opponent material for attack ads on “shilling for Wall Street?”

Third, there are required studies and rulemaking galore in Dodd-Frank, but it is crucial to draw some distinctions: In some cases, an agency has a mandate to write rules. For example, the Federal Reserve is required to issue rules defining the prudential regulations that will apply to those institutions designated as systemically important by the Financial Stability Oversight Council. (Holy mole – that is a mouthful!) Of course, the Fed has quite a bit of leeway in writing these rules. In other cases, an agency may have to do a study and has authority to write rules, but can choose not to do so. Case in point – the SEC and fiduciary duties for broker-dealers. A third category are required studies that leave it up to Congress to figure out what to do. For example, the GAO must conduct a study on what the effects would be if Congress repealed the Tower Amendment, which prevents the SEC and Municipal Securities Rulemaking Board from requiring that municipal entities make filings with either agency before issuing securities. In this last category, it is clear what powers Congress has. By contrast, Congress doesn’t have a veto in ordinary rulemaking and adjudication by agencies (cases like INS v. Chadha cut back on attempts by Congress to insert themselves formally into the administrative process in creative ways).

Congress can and does use its investigative powers to shape agency rulemaking indirectly. Here the numerous studies required by Dodd-Frank may provide members of Congress of both parties with a natural “conversation starter.” Congress can also wield its other powers – Senate confirmations and the power of the appropriations purse strings to “shape” agency behavior. Which is where all those fights in Dodd-Frank over whether an agency is independent, including how the agency is funded, will matter.

However, fights over nominations and appropriations are not without risks for Congressional opponents of agency action. Recall the government shutdown in 1995. Which brings us back full circle to the differences in the politics of health care versus financial reform (versus tax reform etc.)

That’s enough for now. Let’s see what the Masters have to say tomorrow.

Administrative Law, Finance, Financial Crisis, Politics | Bookmark

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