GAO: Dodd-Frank rules escaping review

Congress may not be getting a fair chance to review some financial regulators’ new rules, according to a Government Accountability Office (GAO) report.

The 139-page report found that some agencies might be allowing major financial regulations issued under the Dodd-Frank financial reform law to go through the formal rule-making process with uneven oversight, including the possibility that they skip being earmarked for congressional review. 

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Before being issued to the public, most regulations head to the White House’s Office of Management and Budget (OMB) for an interagency review. Rules expected to have an annual economic effect of at least $100 million are designated as “major” and can be reviewed — and potentially rejected — by Congress under the Congressional Review Act.

So far, 36 Dodd-Frank regulations have been considered major rules.

But the GAO, which acts as Congress’s investigative arm, found that for some Dodd-Frank regulations, federal agencies and the OMB “may not be consistently determining which rules are considered major rules under the Congressional Review Act.”

The budget office “does not address whether independent agencies should submit all rules for review or how they should apply major rule criteria,” the GAO found. As a result, some agencies might be submitting their rules for an interagency review and others might not.

The GAO found different rules that seemed to have similar economic impacts “but were not similarly classified as major.”

“These issues raise the risk of some rules not being properly classified as major, limiting Congress's ability to review these rules before they become effective.”

The GAO suggests that the budget office issue new guidance to standardize how agencies determine which rules will be determined to be major regulations.

“In the absence of such guidance, we found that federal financial regulators may have used different processes for submitting their rules and analyses to OMB, and for applying [Congressional Review Act] criteria,” it said. “These inconsistent processes could lead to the inconsistent classification of some rules.”

The report notes that the OMB “disagreed” about the need for such guidance and denied that its classification of major rules was inconsistent.

The GAO report also criticized federal regulators’ lack of preparations for determining whether or not their rules have been effective.

In 2011, the GAO suggested that regulatory agencies determine how they will measure the effectiveness and impact of Dodd-Frank regulations. Wednesday’s report found that they have not done that.

“GAO maintains that doing so would position the regulators to make their future retrospective reviews as robust as possible,” it said.