With the Dodd-Frank financial-reform bill moving toward a final vote in the House and the Senate, Binyamin Applebaum writes that bank lobbyists are shifting their attention from legislators to regulators:
Shaping regulations is a different game than shaping legislation. Political considerations carry less weight. Instead, regulators crave data that can be used to justify decisions. ... Historically, industry groups have dominated these information wars, plying regulators with exhaustive studies and detailed analyses of the options at hand. Trade groups have more money and more people, and they often produce and control the relevant information about their business and customers.
This observation gets to the reasons regulators have been asked to perform so many studies before writing the specific rules that Congress broadly outlined -- as a tactic to delay key provisions; to allow industry groups to weigh in and influence the rule-making; and, less cynically, to allow regulators to push back against just that kind of manipulation.
This last point is why the bill creates new resources for regulators, like the Office of Financial Research at the overarching Financial Stability Council and the Consumer Financial Protection Bureau's ability to collect data on consumer lending. These in-house think tanks are designed to provide better and more objective data to regulators across the board, creating some independence from industry arguments.
However, it's not just industry weighing in: Anyone can comment on pending rules, and financial reformers have a model in the activists who pursued the recent health-care overhaul. They've begun organizing around the agencies implementing the law, arguing in favor of more progressive guidelines. There's no reason that the organizations that sprang up around financial reform shouldn't do the same around key provisions in the financial-reform bill -- leverage and capital requirements, derivatives rules, and basically the bulk of the bill that has been left in the hands of regulators -- presuming it becomes law. It's also one more reason to keep an eye on regulatory appointments.
-- Tim Fernholz
