Almost lost in the hyperbolic distractions so beloved by the D.C. press, was the House passage of H.R. 1062 on May 17, 2003, a bill to gut the capacity of the Security and Exchange Commissions rule making to protect American investors. And, Nevada Representatives Amodei (R-NV2) and Heck (R-NV3) voted in favor of it. Representatives Titus (D-NV1) and Horsford (D-NV4) voted against H.R. 1062.
What did they support?
“SEC Regulatory Accountability Act – Amends the Securities Exchange Act of 1934 to direct the Securities and Exchange Commission (SEC), before issuing a regulation under the securities laws, to: (1) identify the nature and source of the problem that the proposed regulation is designed to address in order to assess whether any new regulation is warranted; (2) use the SEC Chief Economist to assess the costs and benefits of the intended regulation and adopt it only upon a reasoned determination that its benefits justify the costs; (3) identify and assess available alternatives that were considered; and (4) ensure that any regulation is accessible, consistent, written in plain language, and easy to understand.” [Thomas CRS Summary] (emphasis added)
Oh, how the Wall Street Wizards will love this one! The Little Wizards in the investment banking sector have long wanted all regulators to use the “cost/benefit” standard for restraining the excesses of investment enthusiasm. H.R. 1062 seeks to gut the Dodd-Frank financial reform statute enacted in the wake of the Mortgage Meltdown and attendant financial machinations, and unleash the Wall Street Wizards from all regulation “past, present, and future.” [HuffPo] We already have “cost/benefit analysis” built into the system — so why another bit of legislation?
Here’s the little kicker in the bill: “This bill was transparently designed to allow each regulation to be challenged in court by industry, but not by consumer advocates.” [HuffPo] Got it?
Evidently, Representatives Heck and Amodei believe this to be a good idea — that the financial sector battalion of legal expertise may challenge each and every regulation proposed by the Securities and Exchange Commission — but the rules may NOT be challenged by consumer advocates.
As Representative Gwen Moore (D-WI4) explains:
“The ink would not be dry on a SEC rule before the race to the courthouse door to challenge the regulations would begin. Presumably, the most powerful industry participants would challenge the rules in the way that achieves their narrow interest, which may be to the detriment of investors or other less-affluent market participants. In this way, the most powerful industry interests would be able to not only use the courts to undo consumer protections, but to also seek competitive advantage over competitors.”
The big get bigger, the fat get fatter, and the rest of us sit waiting to find out how best to serve the Big Bankers on Wall Street.
But wait! It gets better — if you happen to be a Big Banker on The Street:
Requires the SEC to: (1) consider whether the rulemaking will promote efficiency, competition, and capital formation; (2) consider the impact of the regulation upon investor choice, market liquidity, and small business; (3) explain in its final rule the nature of comments received concerning the proposed rule or rule change; and (4) respond to those comments, explaining any changes made in response and the reasons that it did not incorporate industry group concerns regarding potential costs or benefits. [Thomas CRS Summary] (emphasis added)
Any rule has to promote “capital formation?” Translation: No SEC rule may prevent any investment banking operation from accumulating capital (money) just about any way it wants to, and even further — if the rule does prevent some Wall Street investment house or Monster Bank from accumulating all the coin of the realm it wants then the SEC has to explain (presumably to Wall Street’s satisfaction) why “industry group concerns” weren’t incorporated into the rules. Another translation might be in order: The SEC can’t propose and adopt any rule Wall Street doesn’t like.
Wall Street would like to modify some existing rules (like those pertaining to the Dodd-Frank Act) and H.R. 1062 offers them a way to do that:
Requires the SEC to: (1) review its existing regulations periodically to determine if they are outmoded, ineffective, insufficient, or excessively burdensome; and (2) modify, streamline, expand, or repeal them. [Thomas CRS Summary] (emphasis added)
How nice. Now, just what does “excessively burdensome” actually mean? The standard Wall Street dictionary applies the term to any regulation they don’t like. Is it “excessively burdensome” to require a Wall Street firm to report what it’s doing with derivatives? Is it “excessively burdensome” to make Wall Street stop playing casino games with people’s mortgages? If the rule isn’t “excessively burdensome,” then how about making rule proposals almost impossible? The bill had a little something for that prospect too:
“Requires the SEC, whenever it adopts or amends a major rule, to state in its adopting release: (1) the purposes and intended consequences of the regulation, (2) the post-implementation quantitative and qualitative metrics to measure the economic impact of the regulation and the extent to which it has accomplished the stated purposes, (3) the assessment plan that will be used under the supervision of the Chief Economist to assess whether the regulation has achieved those purposes, and (4) any foreseeable unintended or negative consequences. Requires the assessment plan to: (1) consider the costs, benefits, and intended and unintended consequences of the regulation; and (2) specify the data to be collected, the methods for its collection and analysis, and an assessment completion date.” [Thomas CRS Summary]
Got all that? How is an “unintended consequence” foreseeable? That’s why they’re called “unintended” in the first place. So, the SEC cannot enforce any rule which might at any point in the future have an “unintended consequence” because that would violate the provision calling for a full assessment of the development of the rule.
After this bit of legislative legerdemain on behalf of the Big Banks and their cohorts on Wall Street, Representatives Amodei and Heck have not a quarter of an inch of room to talk about protecting small businesses — who are all too often at the mercy of the Big Banks, nor do they have any leeway to discuss protecting investors and their retirement accounts. Nevada homeowners facing all manner of difficulties with mortgages that were sold off in packages and then bet on more enthusiastically than the Kentucky Derby might want to inquire precisely how Representatives Amodei and Heck are protecting their interests?
Representatives Heck and Amodei have joined the Big Bank Boys Club in this vote; a connection avoided by Representatives Horsford and Titus.
If you are not a resident of Nevada and would like to see how your Representative voted on this egregious bit of pandering to Wall Street and Big Bank interests click here.