Stanford Law Review Online: Dodd-Frank Regulators, Cost-Benefit Analysis, and Agency Capture
The Stanford Law Review Online has just published an Essay by Professors Paul Rose & Christopher J. Walker entitled Dodd-Frank Regulators, Cost-Benefit Analysis, and Agency Capture. Professors Rose and Walker argue that Dodd-Frank regulators should consider more
seriously the democratic accountability concerns at play when regulating the financial markets.
The lack of attention to accountability is particularly troubling in the Dodd-Frank con-text, where most regulators are independent agencies and thus less demo-cratically accountable via presidential oversight. In particular, independent agencies are not required to submit proposed rules and accompanying eco-nomic analyses for presidential review. Nor are their high-ranking officials subject to plenary presidential removal authority. Without another means of accountability—e.g., a robust cost-benefit analysis embedded in notice-and-comment rulemaking—independent agencies are more vulnerable to agency capture.
Despite decades-long bipartisan support for cost-benefit analysis, regu-lators of financial markets (whose rulemaking is not subject to presidential review) have been slower and more haphazard in adopting this method than their executive agency counterparts. Especially now that Dodd-Frank has exponentially increased the amount of financial rulemaking and considera-bly raised the stakes for regulating the financial markets, financial regula-tors can and should ground their rulemaking in a proper cost-benefit analy-sis to arrive at more rational decisionmaking and more efficient regulation. Conducting a rigorous cost-benefit analysis via notice-and-comment rule-making also makes for good governance. Without such public transpar-ency—especially in the context of independent agencies—democratic accountability suffers, and agency capture becomes a greater threat.
Read the full article, Dodd-Frank Regulators, Cost-Benefit Analysis, and Agency Capture at the Stanford Law Review Online.