Toomey’s ‘Guidance’ Repeal Guide New openings for Congress to scrub Obama-era regulation.
https://www.wsj.com/articles/toomeys-guidance-repeal-guide-1509312087?mod=nwsrl_review_outlook_u_s_&cx_refModule=nwsrl#cx_testId=16&cx_testVariant=ctrl&cx_artPos=6
Republicans have made impressive use of the Congressional Review Act, overturning 14 last-minute Obama rules. They might be able to do more now that a government agency has confirmed that Congress can also use the law to repeal diktats the Obama Administration slipped in under the regulatory radar.
One example is the 2013 “guidance” that federal financial regulators issued on leveraged lending. This was another example of Obama officials ducking formal rule-making by claiming they were merely issuing “voluntary” suggestions. The banking industry knew better and chose to cut back on leveraged loans, denying a vital source of capital for indebted companies that lack access to public capital markets, and pushing such activity to nonbank lenders that are even less regulated and make riskier bets.
In light of this migration and uncertainty, Pennsylvania Senator Pat Toomey recently asked the Government Accountability Office to judge whether the guidance counts as a “rule” under the Congressional Review Act. The GAO has now confirmed that it does.
The opening words of the 1996 CRA read: “Before a rule can take effect,” a federal agency must submit a report to Congress. But regulators never did on the leveraged lending guidance. No one has tested the legal limits of the CRA language, but in theory it means the lending guidance is null and void until the Trump Administration submits a report.
As Mr. Toomey notes, even a more limited reading of the law gives Republicans the ability to strike down the lending guidance. The CRA says the clock for Congress’s review of a rule doesn’t begin until a report is submitted. Congress then has 60 legislative days to override with simple majorities in both chambers. Mr. Toomey says the Senate parliamentarian has found that the GAO ruling counts as the official report, and so the clock is now ticking.
Republicans would do well to override the lending guidance on policy grounds. After the financial crisis, regulators subjected banks to new capital and liquidity requirements. They then layered on new restrictions on banking activities, such as leveraged lending. The combination has needlessly driven up costs and curtailed lending.
Democrats and the media want to focus on the rules Republicans are dismantling, rather than on the sneaky way the policies were promulgated. The Obama Administration made an art of evading public scrutiny by replacing formal rule-making with a stream of “guidance,” “bulletins” and “statements of policy.”
The CRA was designed to hold agencies accountable and give Congress a say when they exceed their writ. Thanks to the Toomey precedent, Republicans have a new opportunity to scrub the regulatory ledgers.
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