Posted on 30th Sep 2011 @ 12:07 PM

It’s been more than 14 months since President Obama signed the Dodd-Frank Act and there’s no let-up in the partisan bickering over the controversial bill.

On September 22, Senator Richard Shelby (R-AL), ranking Republican on the Committee on Banking, Housing, and Urban Affairs, introduced legislation that would require all financial regulators to conduct comprehensive and transparent economic analysis in advance of adopting new rules. Shelby’s bill, the Financial Regulatory Responsibility Act of 2011, is cosponsored by all Republican members of the Senate Banking Committee.

“American job creators are under siege from the Dodd-Frank Act,” said Shelby. “In their rush to expand the reach of government into our private markets, Congressional Democrats refused to consider the impact of the Dodd-Frank Act on economic growth or job creation. As a result, regulators are about to subject those who had nothing to do with the financial crisis to hundreds of new rules and regulations without determining whether the benefits exceed the costs. More American workers will lose their jobs as Washington bureaucrats implement the Democrats’ vision of a federally supervised economy.”

Shelby’s bill would establish factors the agencies would have to consider in their analysis of new rules, allow the public to comment, and require an agency to revisit the effectiveness of a rule five years after it takes effect.

It would also establish a council of chief economists to bolster the quality of economic analysis being conducted and to ensure that the financial regulators work together to understand the aggregate effects that financial regulations are having on the economy. Through a judicial review mechanism, the bill would ensure that the agencies take their new economic analysis requirements seriously. Finally, the bill would mandate that a rule does not take effect if its costs outweigh its benefits.

“Many of the proposed Dodd-Frank rules contain cursory, boilerplate cost-benefit analyses that do little to quantify the rules’ costs and benefits and their effect on the economy,” said Senator Mike Crapo (R-Idaho). “The court’s unanimous decision to invalidate the SEC proxy access rule for failing to adequately analyze its economic costs reaffirms that economic analysis matters and that a check-the-box mentality will not suffice. By requiring federal financial regulators to conduct meaningful economic analysis, we will get better rules that can withstand scrutiny of whether the benefits of the proposed rule outweigh its cost.”

ICBA Voices Support

Community banks were quick to throw their support behind Shelby’s bill. In a letter to Shelby, Independent Community Bankers of America president and CEO Cam Fine said the bill is very helpful because it would require all financial agencies to perform a more robust and rigorous cost-benefit analysis of proposed regulations and provide more transparency in the rulemaking process.

“Regulations must not be onerous or imposed on a one-size-fits-all basis,” Fine wrote. “Too often community banks contend with unwieldy and costly regulatory burdens that jeopardize their capacity to raise capital, lend to small businesses and consumers, and support job creation. In this difficult economic environment, the Financial Regulatory Responsibility Act offers welcome relief by putting a reasonable check on new regulations, ensuring that they do not jeopardize community banks’ viability by imposing costs that outweigh any benefit.”

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