[Senate Hearing 111-905]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 111-905



                               before the


                                 of the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE


                             SECOND SESSION


                             AUGUST 3, 2010


                          Serial No. J-111-105


         Printed for the use of the Committee on the Judiciary

64-724                    WASHINGTON : 2011
For sale by the Superintendent of Documents, U.S. Government Printing 
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                       COMMITTEE ON THE JUDICIARY

                  PATRICK J. LEAHY, Vermont, Chairman
HERB KOHL, Wisconsin                 JEFF SESSIONS, Alabama
DIANNE FEINSTEIN, California         ORRIN G. HATCH, Utah
ARLEN SPECTER, Pennsylvania          JON KYL, Arizona
CHARLES E. SCHUMER, New York         LINDSEY GRAHAM, South Carolina
RICHARD J. DURBIN, Illinois          JOHN CORNYN, Texas
BENJAMIN L. CARDIN, Maryland         TOM COBURN, Oklahoma
AL FRANKEN, Minnesota
            Bruce A. Cohen, Chief Counsel and Staff Director
             Brian A. Benzcowski, Republican Staff Director

        Subcommittee on Administrative Oversight and the Courts

               SHELDON WHITEHOUSE, Rhode Island, Chairman
DIANNE FEINSTEIN, California         JEFF SESSIONS, Alabama
CHARLES E. SCHUMER, New York         JON KYL, Arizona
BENJAMIN L. CARDIN, Maryland         LINDSEY GRAHAM, South Carolina
             Stephen C.N. Lilley, Democratic Chief Counsel
               Matthew S. Miner, Republican Chief Counsel

                            C O N T E N T S




Feingold, Hon. Russell D., a U.S. Senator from the State of 
  Wisconsin, prepared statement..................................    50
Franken, Hon. Al, a U.S. Senator from the State of Minnesota.....     3
Kaufman, Hon. Edward E., a U.S. Senator from the State of 
  Delaware.......................................................     4
Whitehouse, Hon. Sheldon, a U.S. Senator from the State of Rhode 
  Island.........................................................     1


Bagley, Nicholas, Assistant Professor of Law, University of 
  Michigan Law School, Ann Arbor, Michigan.......................     6
Shapiro, Sidney, Associate Dean for Research and Development, 
  Wake Forest University School of Law, Winston-Salem, North 
  Carolina, and Member Scholar, Vice-President, Center for 
  Progressive Reform.............................................     8
Troy, Tevi D., Ph.D., Visiting Senior Fellow, The Hudson 
  Institute, Silver Spring, Maryland.............................     9

                       SUBMISSIONS FOR THE RECORD

Babcock, Hope M., Professor of Law, Georgetown Law, Washington, 
  DC, letter.....................................................    34
Bagley, Nicholas, Assistant Professor of Law, University of 
  Michigan Law School, Ann Arbor, Michigan, statement............    38
Carpenter, Daniel, Allie S. Freed Professor of Government, 
  Director, Center for American Political Studies, Harvard 
  University, Cambridge, Massachusetts, letter...................    46
Consumers Union, Ellen Bloom, Director, Federal Policy and 
  Washington, Office; and Ami V. Gadhia, Policy Counsel, 
  Washington, DC, letter.........................................    48
Earthjustice, Joan Mulhern, senior Legislative Counsel, 
  Washington, DC, letter.........................................    52
Logan, David A., Dean & Professor of Law, Roger Williams 
  University, Bristol, Rhode Island, letter......................    54
Shapiro, Sidney, Associate Dean for Research and Development, 
  Wake Forest University School of Law, Winston-Salem, North 
  Carolina, and Member Scholar, Vice-President, Center for 
  Progressive Reform.............................................    56
Snape, William J., III, Senior Counsel, Center for Biological 
  Diversity, American University's Washington College of Law, 
  Washington, DC, statement......................................    72
Troy, Tevi D., Ph.D., Visiting Senior Fellow, The Hudson 
  Institute, Silver Spring, Maryland.............................    74
Wagner, Wendy E., Joe A. Worsham Centennial Professor, University 
  of Texas School of Law, statement..............................    77



                        TUESDAY, AUGUST 3, 2010

                               U.S. Senate,
           Subcommittee on Administrative Oversight
                                            and the Courts,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:03 a.m., in 
room SD-226, Dirksen Senate Office Building, Hon. Sheldon 
Whitehouse, Chairman of the Subcommittee, presiding.
    Present: Senators Whitehouse, Kaufman, and Franken.


    Chairman Whitehouse. The hearing of the Subcommittee will 
come to order. We will be proceeding without the Ranking 
Member. He has responsibilities elsewhere because of the Kagan 
nomination coming to the floor this morning and because of an 
appointment he has at the White House as well. So it is a 
scheduling conflict that is unavoidable. But I am delighted 
that the witnesses are here.
    I have a brief statement I would like to make, and then the 
witnesses will be sworn. If other Senators have arrived, we 
will give them an opportunity to make a similar opening 
statement, and then we will get to your testimony, which is the 
order of the day.
    Over the last 50 years, Congress has passed critical pieces 
of legislation to protect the public interest--laws that 
protect the water that Americans drink and the air we breathe, 
ensure the safety of the cars we drive and the medications we 
take, and require the fair and open trading of the stocks and 
mutual funds Americans invest in to finance retirement or our 
children's education.
    In these and other areas, Congress has tasked an alphabet 
soup of regulatory agencies with the responsibility of 
administering the policies established by Congress through 
rulemaking, adjudication, and enforcement. As a result, 
regulatory agencies have vast and vital responsibilities to 
Congress and the American people. It is, thus, a vast and vital 
consequence that regulatory agencies retain their integrity, 
that they serve the public interest, and fulfill the missions 
defined by Congress.
    Our administrative state has grown more complex than 
anything that our Founding Fathers foresaw. The fundamental 
principle is that the administrative agencies must further the 
policies crafted by Congress. But beyond that, the genius of 
the Framers of our Constitution at crafting checks and balances 
in Government was never applied to our modern administrative 
state. Here we are on our own.
    It is often not in the economic interests of regulated 
industries to support the mission Congress has defined. 
Regulations that protect the public interest rather than the 
special interests do not always go down well with industry. 
Industries often have incentives to co-opt and to control 
regulatory agencies. Observably, time and time again, 
industries have acquired undue influence over regulatory 
agencies that exist to serve all Americans. Surreptitiously and 
stealthily, industries have sought to control regulatory 
agencies, to capture agencies. Sadly, industries too often have 
succeeded, turning agencies away from the public interest to 
the service of narrow corporate interests.
    We have seen the disasters that can ensue when an agency 
has been captured, from MMS, whose failures and shocking 
behavior led to the horrors of the oil spill in the Gulf, to 
the SEC, asleep at the switch as financial services companies 
created exotic and irresponsible financial products that took 
our economy to the brink of disaster.
    These are the fruits of regulatory capture: the revolving 
door, deliberate inattention, industry control, often outright 
corruption. It is a poisonous tree indeed.
    This threat of agency capture is by no means a novel 
concept. As I have described previously on the floor, from 
Woodrow Wilson in 1913 through Marver Bernstein, the first dean 
of the Woodrow Wilson School at Princeton in 1955, to the Nobel 
Prize-winning economist George Stigler, to the editorial page 
of the Wall Street Journal this year, Americans from across the 
political spectrum have recognized the continuing danger of 
agency capture.
    At bottom, agency capture is a threat to democratic 
Government. We the people pass laws through a democratic and 
open process. Powerful interests, nonetheless, want a second 
secret bite at the apple. They want to capture the regulatory 
agencies that enforce those laws so that they can blunt their 
effects, turning laws passed to protect the public interest 
into policies and procedures that protect industry interests.
    In America we pride ourselves on open government. It is 
perhaps one of our signature contributions to government around 
the world. Unfortunately, however, agency capture is a deed 
that is done quietly and in the dark. The tentacles of industry 
intrude stealthily into the agencies. The agencies are often 
obscure, and there is a conspiracy of silence that surrounds 
agency capture.
    Agency capture is also systemic. That is why it has been in 
the canon of economics and administrative law for nearly a 
hundred years. It is endemic and recurring because the 
institutional pressure of industry on the regulator is 
    Clearly, we in Congress must meet our constitutional 
obligation of oversight of the executive branch. We must work 
to stamp out agency capture whenever and wherever we find it. 
But ultimately protecting the public against the systemic, 
relentless, and institutional pressure will require a systemic 
and institutional counterpressure.
    Episodic scandals and recurring disasters are no way to go 
through life. If the financial meltdown and the gulf disaster 
are not education enough about the perils of agency capture, 
the real harms that our country and our fellow citizens can 
suffer, then shame on us.
    I look forward to the witnesses' testimony and to working 
with my colleagues to protect the integrity of our 
administrative agencies against the threat of capture.
    Senator Franken, would you care to make an opening 


    Senator Franken. Well, thank you, Mr. Chairman, for your 
focus on this subject and for calling this hearing. I look 
forward to the testimony of the three gentlemen.
    I did not prepare an opening statement, but I was re-
reading something that I had actually written about in 2003 
that kind of spoke to this subject, and particularly on the 
Bush administration, and I think Dr. Troy has worked for that 
administration and is going to be speaking to the issue of 
agency capture. It was about the Interior Department, and I 
wrote about a number of people who had been appointed to the 
    Mark Rey was appointed as Under Secretary of Agriculture 
for Natural Resources and Environment and put in charge of 
regulating forests, and he had previously lobbied for polluters 
of forests.
    Bennett Raley was appointed to be the Interior Secretary 
for Water and Science, and he was put in charge of water, and 
previously he had lobbied for polluters of water.
    Rebecca Watson had been appointed Assistant Secretary of 
the Interior for Lands and Mineral Management, and she was put 
in charge of land that contains minerals, and she had 
previously been a lobbyist for polluters of land that contains 
    Cam Toohey was made Special Assistant to the Secretary of 
the Interior for Alaska and was put in charge of Alaska and had 
previously lobbied for polluters of Alaska.
    Patricia Lynn Scarlett was appointed Assistant Secretary of 
the Interior for Policy Management and Budget, and she was in 
charge of Government regulations and had previously lobbied for 
polluters of pretty much everything.
    Steven Griles, who had been appointed Deputy Secretary of 
the Interior, I believe went to prison for some time.
    It seemed to me that during the Bush administration there 
seemed to be agency capture of a certain type, which is having 
people who did not necessarily believe in the regulation of the 
industries that they were regulating put into position to 
regulate those industries and that these had been actually 
lobbyists for those industries before they were put in.
    I also remember the agency FEMA, and there was this guy 
that we all remember, Michael Brown, who had been put in charge 
of FEMA and had been put in charge I think because the guy 
right before him, Allbaugh, had been his college roommate, and 
Michael Brown's previous job had been supervising the judges of 
Arabian horses.
    I think that the reason that Brownie was given the job was 
not just that he had lost his job because he had been 
insufficiently able to supervise the judging of the horses, but 
that he was there to make sure that the previous head of FEMA 
would be getting contracts from FEMA, because he started a 
lobbying firm. And sure enough, when Katrina happened, not only 
did Mr. Brown not do a very good--not do a ``heck of a job,'' 
but many FEMA contracts went where they were intended to go. 
And I think this is a kind of cronyism that was special, not 
unique to the Bush administration but led to a kind of agency 
capture that was pretty remarkable.
    So I look forward to hearing all the different, more subtle 
kinds of agency capture than the very, very obvious ones that I 
have just discussed. And I am looking forward to the testimony 
of all the witnesses.
    Thank you.
    Chairman Whitehouse. Senator Kaufman, welcome.

                       STATE OF DELAWARE

    Senator Kaufman. Thank you, and, Mr. Chairman, I want to 
tell you, I cannot tell you how much I appreciate you holding 
this hearing. There is a lot of confusion out there, and it is 
not a matter of whether we have regulations or not. We have to 
have regulations. No one has come up with a plan that I have 
ever read that would have the Congress of the United States 
writing laws that immediately people had to adhere to. And one 
of the things that has made this Government work is that we 
have regulators, people who can spend every day dealing with 
the incredible, complex problems we have.
    Many times in the debate today it is almost like, well, we 
are going to do away with the regulators; we are going to do 
away with regulation. That is not an option, and I do not know 
any serious thinker on either side of the political divide or 
the ideological divide that believes that we can do away with 
regulators and do away with regulations. Yet much of the debate 
is formed that way.
    So what we are trying to do is figure out how do we have 
better regulators and better regulations? And some of us have 
the view--and I think it was an ideological difference that I 
think was truly felt by a number of people in the past 
administration--that we just do not need as much regulation, 
that, you know, there is too much regulation and Government is 
too big, it encompasses too much, and we just have--you know, I 
would say the folks by and large on this side of the aisle have 
a difference of view on that. And we can talk about that and 
how that worked and how it did not work in the past, and I 
think Senator Franken has done a good job of laying out some of 
the ugly things that happened when you have an administration 
that just does not believe we should have regulation and, 
therefore, has no commitment to it.
    The more pervasive problem, I think, which goes from 
administration to administration, is the one that we have all 
read about for 30, 40, 50 years, and that is the idea of the 
iron triangle or the fact that what happens is the regulators 
get too closely involved with the administration and with the 
interest groups. And, clearly, that has been around for a 
while, and that is good grist for discussion, and I think it 
raises a problem. It is a little like Madison 10, you know, 
where interest groups--freedom is to interest groups as oxygen 
is to fire. I mean, this is something--we are not going to--I 
put this in the category of things like cutting grass. Unless 
you want asphalt over your front lawn, every 2 weeks in the 
summertime you are going to have to cut grass, and we are going 
to have to cut this grass.
    I think what is great about what Senator Whitehouse has 
done to pull this together is this is just one of a whole 
series of problems that have to do with regulation. It is not 
whether you have a view about regulation that is ideological 
and whether we should have it or not or how permissive we can 
be based on an overall Government policy. It is a little bit, 
but not really, the kind of iron triangle problem. This is a 
very specific point which--it is a revolving door. It is the 
lack of oversight. It is a lack of clear rules, and definitely 
it is a lack of conflicted--it is a fact we have conflicted 
    So I think what is great about this discussion today is, 
OK, let us decide we are going to have regulation and we are 
going to have regulators. We are going to decide that it is 
going to be the policy of the Government that we do the very, 
very, very best job we can in regulation. We have some 
revolving door problems of our own in the Congress, and there 
are revolving door problems in the administration. But what we 
are going to focus on today is kind of how do you get 
regulators that are going to be able to make the best decision 
and not be conflicted. I mean, I think that is really what we 
are coming to. How do you allow good people who are smart to 
sit together and have a discussion where one is not 
representing A Interest Group and one is not representing B 
Interest Group and one is not representing C Interest Group, 
because either that is where they came to, that is where they 
are going to be going afterwards, that is where they have a 
    So I am really looking forward to the three witnesses today 
on what they have written, and I am really interested in seeing 
where we can go in order to make this better. This is really an 
incredibly important problem that we have to overcome if we are 
going to have successful Government, as all of us want, 
Republicans and Democrats, and most of all what the American 
people want. So I want to thank you again, Mr. Chairman.
    Chairman Whitehouse. Thank you, Senator Kaufman. Thank you 
for joining us.
    If I could ask the witnesses to stand and be sworn. Do you 
swear that the testimony you are about to give will be the 
truth, the whole truth, and nothing but the truth, so help you 
    Mr. Bagley. I do.
    Mr. Shapiro. I do.
    Dr. Troy. I do.
    Chairman Whitehouse. I will just go right across the line. 
The first witness will be Professor Nicholas Bagley. He is an 
assistant professor of law at the University of Michigan Law 
School where he researches administrative law, regulatory 
theory, and health law. His article ``Centralized Oversight of 
the Regulatory State,'' which he co-authored with Richard 
Revesz, was selected as the best article in the field in 2006 
by the American Bar Association's Section on Administrative Law 
and Regulatory Practice. Professor Bagley received his B.A. 
from Yale University and a J.D. from the New York University 
School of Law. He clerked for Judge David S. Tatel on the U.S. 
Court of Appeals for the District of Columbia and Justice John 
Paul Stevens on the United States Supreme Court. He also served 
as an attorney on the appellate staff in the Civil Division of 
the U.S. Department of Justice. We welcome him and appreciate 
his testimony.
    Professor Bagley. Could you put your microphone on?


    Mr. Bagley. Mr. Chairman and members of the Subcommittee, 
it is an honor to testify before you today about agency 
    In principle, agency capture is a simple concept: We say an 
agency is ``captured'' when it caters to narrow, private 
interests at the expense of the public welfare. As my testimony 
will explore, however, agency capture is, in practice, quite a 
bit more complicated than that.
    The linchpin to understanding agency capture is the insight 
that industry groups will generally have enormous 
organizational advantages over the dispersed and apathetic 
public when it comes to lobbying Federal agencies. With some 
regularity, industry groups can exploit that organizational 
advantage to pressure regulators to attend to their private 
interests at the expense of the public interest.
    For example, Federal agencies must of necessity cooperate 
with the entities that they regulate in order to procure needed 
information, compliance, political support, and guidance. And 
sometimes that cooperation can slip into capture. Agency 
officials might get distorted information from the industries 
they regulate; they might want to avoid the political or legal 
firestorm that would engulf their agency if they targeted a 
powerful interest group; or they might just start to see the 
world the way that industry sees it.
    The revolving door between agencies and the industries that 
they regulate can also lead to capture. Agency officials often 
come from the private sector and may plan on returning once 
they have completed their stints as government employees. They 
may, therefore, share a common perspective with industry and 
may be reluctant to jeopardize the prospect of securing future 
    These examples only scratch the surface of the myriad ways 
that industry groups can capture Federal agencies. And as the 
financial meltdown and the gulf oil spill both vividly 
demonstrate, the capture problem is real and it is of deep 
    But a cautionary word is in order. While agency capture 
offers a compelling story about how some agencies operate some 
of the time, it is only a crude stereotype about agency 
behavior. Some agencies succumb to interest group pressure, but 
others, most others, resist it admirably. Federal agencies are 
complicated places, and no one story about how they operate 
will ring true all of the time.
    Capture is also tricky because it is often very hard, if 
not impossible, to reliably identify. Although industry-agency 
contacts will occasionally be inappropriate enough on their 
face to suggest capture, most of the time they will involve 
altogether innocuous meetings, phone calls, and e- mails. And 
even if the agency has shown some sensitivity to the industry, 
that alone does not suggest that the agency has discarded the 
public interest. The crucial question is whether the agency 
would have more zealously performed its duties in the absence 
of pressure from the regulated interests, and most of the time 
it is going to be impossible to know the answer to that 
question to a certainty.
    Further complicating matters, there is no consensus about 
exactly what agency capture is. For most academics, it means 
the dynamic whereby well-organized industry groups exert undue 
influence over agency decisionmakers to the detriment of the 
public. But for others, it is a broader concept. That 
encompasses an agency's perceived responsiveness to any outside 
agenda, however public regarding that agenda might be. For 
still others, capture is just shorthand for generic disapproval 
of agency behavior.
    I do not mean by any of this to invite complacency. Agency 
capture is a recurring and urgent problem for the regulatory 
state. But because capture looks so different from one agency 
to the next, because it is difficult to reliably identify 
capture when it occurs, and because capture means different 
things to different people, no single silver bullet will 
eliminate agency capture. The job will instead require 
sensitivity to the particular bureaucratic and political 
context in which it arises.
    We may also have greater success eliminating the conditions 
that allow capture to flourish than addressing capture after it 
has taken hold. Promising legislative remedies include 
carefully reviewing the sources and adequacy of agency funding, 
ensuring that agencies have not been tasked with conflicting 
missions, and enhancing the prestige of public employment in an 
effort to shut the revolving door.
    In the final estimation, however, eliminating agency 
capture will require political vigilance. Vested interests that 
capture agencies are also quite capable of influencing 
politicians, and it will take more than a modicum of political 
courage to press for lasting change at some of our most 
beleaguered agencies. I hope that this hearing reflects a 
renewed commitment to addressing agency capture across the 
regulatory state.
    Thank you again for allowing me to testify today, and I 
would be happy to answer any questions that you might have.
    [The prepared statement of Mr. Bagley follows:]
    Chairman Whitehouse. Thank you, Professor Bagley. We very 
much appreciate your testimony.
    Our next witness is Sidney Shapiro. He is the University 
Distinguished Chair in Law at Wake Forest University and the 
vice-president of the Center for Progressive Reform. He is the 
author of numerous books and articles, including ``The People's 
Agents and the Battle to Protect the American Public,'' and two 
law school textbooks on regulatory law and practice and 
administrative law. In addition to his scholarly work, 
Professor Shapiro has served as a consultant to the 
Occupational Safety and Health Administration and the 
Administrative Conference of the United States.
    Professor Shapiro, welcome.


    Mr. Shapiro. Thank you. Mr. Chairman and members of the 
Committee, thank you for inviting me here today to share with 
you my views on understanding the threat of agency capture and 
its relationship to protecting the public interest.
    The type of capture that receives the most attention is 
when an agency fails to protect the public and the environment 
because administrators friendly to industry block new 
regulatory efforts or do not enforce the laws and regulations 
then in effect. The situation at MMS, as Senator Whitehouse has 
pointed out, is a good example of this form of capture.
    Capture can also occur from an imbalance in representation. 
This occurs when industry representatives regularly appear 
before an agency offering detailed comments and criticisms, 
while the agency seldom, if ever, hears from public interest 
groups or members of the public. A number of empirical studies 
revealed this imbalance is significant. The studies are 
described in my written testimony.
    In one, a study of 39 controversial and technical, complex 
air pollutant rules, industry averaged 77.5 percent of the 
total comments while public interest groups averaged only 5 
percent of the comments. In fact, public interest groups file 
comments for only 46 percent of the total number of 
    The final form of capture receives less attention, but it 
is no less effective in preventing reasonable regulation than 
the other forms of capture. This is sabotage capture. It occurs 
when regulatory critics create roadblocks that slow or prevent 
regulation, even in administrations that seek to protect the 
public and the environment. Because this capture is subtle and 
difficult for the public to perceive, it constituents a kind of 
sophisticated sabotage of the regulatory process.
    The two most prominent forms of sabotage capture today are 
the de-funding of the regulatory agencies and the 
politicization of rulemaking by the White House. In my written 
testimony, I give examples of each problem. Allow me to mention 
one related to funding.
    OSHA took more than 10 years to update its regulatory 
standard on cranes and derricks, even though the agency, 
employers, employees, and Members of Congress all agreed for 
that period what needed to be done.
    If Congress is to reduce capture, it is more likely that 
agencies can fulfill its intention to protect people and the 
environment. I have four suggestions as to what Congress might 
    First, Congress cannot count on the administrative law 
system to ensure the accountability of regulatory agencies. 
Public interest groups lack the resources to match up with 
industry in terms of advocacy before agencies and the courts. 
Likewise, they are often not in a good position to call 
Congress' attention to capture. It is, therefore, up to 
Congress to institute more systematic oversight.
    Second, one reason for the de-funding of the regulatory 
agencies is that Congress has failed to study the impacts of 
funding cuts on the agencies. Without this information, 
Congress is not in a position to consider what tradeoffs are 
involved when agencies lack the resources they need and whether 
re-funding them is a higher priority than other items in the 
budget. But, frankly, regulatory agencies are such a small part 
of the discretionary budget that modest increases in funding 
would not affect the budget or the deficit in any significant 
    Third, the deterioration of regulatory government has gone 
relatively unnoticed because Congress lacks good means for 
measuring the performance of regulatory agencies. Congress 
should, therefore, require the development of positive metrics 
or measurements of agency performance that would alert Congress 
and the public when health and safety agencies have been 
    Finally, the Congressional dialog over funding would be 
improved if agencies were required to make it clear how much 
money it would take to actually implement their mandates. Such 
true-up estimates would focus on the resources Government 
itself would need to do the work that Congress expects it to 
    In conclusion, the problem of capture is persistent, 
suggesting it is not easily remedies. In the 1970s, the Senate 
undertook a major study of Federal regulation. A similar effort 
focused on capture, and including the consideration of such new 
ideas as positive metrics and true-up budgets may be in order. 
The study could also consider the costs of delay when agencies, 
because of a lack of funding, are unable to protect the public 
and the environment. The newly reformed Administrative 
Conference of the United States could be tasked with assisting 
Congress in this investigation.
    Thank you.
    [The prepared statement of Mr. Shapiro appears as a 
submissions for the record.]
    Chairman Whitehouse. Thank you very much, Professor 
Shapiro. We really appreciate you being here and lending your 
expertise to this inquiry.
    Our final witness is Dr. Tevi Troy. He is a Visiting Senior 
Fellow at the Hudson Institute, a Senior Fellow at the Potomac 
Institute, and a writer and consultant on health care and 
domestic policy. From 2007 to 2009, Dr. Troy was the Deputy 
Secretary of the U.S. Department of Health and Human Services 
where we worked together through our common interest on 
advancing health information technology. Before going to HHS, 
Dr. Troy served as Deputy Assistant to the President for 
Domestic Policy. He also has worked in both chambers of 
Congress. He holds a Ph.D. in American civilization from the 
University of Texas, and we welcome him here today. Dr. Troy.


    Dr. Troy. Thank you, Mr. Chairman, and thank you, members 
of the Committee, for this opportunity to come and provide 
insight into the question of influence on the regulatory 
process. I ask with your permission, Mr. Chairman, that my 
entire written testimony be placed in the record.
    Chairman Whitehouse. Yes, the full written testimony of all 
the witnesses will be in the record.
    Dr. Troy. Thank you, Mr. Chairman.
    My name is Tevi Troy, as you said, and I am a Fellow at the 
Hudson Institute and former Deputy Secretary at the Department 
of Health and Human Services, and as you mentioned, while I was 
at HHS, I had the pleasure and opportunity to work with you on 
advancing health information technology, which I appreciated, 
and I appreciate your dedication to the subject.
    Capture theory, about which we are here to speak today, I 
think speaks to a real phenomenon, which is the mix of human 
nature and human incentives with increased Government power and 
authority and increasing Government influence. And it makes 
sense, as laid out in public choice theory, that when you have 
people with more skin in the game, people who are affected more 
by regulations, they will make more attempts to influence the 
process. They have more incentive to do so. They will put more 
resources into it. But I think it is important to remember in 
this context that this theory applies to more than just 
industry and that there are multiple countervailing interests 
that I saw in my time in Government that try and have an 
influence on the process. Unions, nongovernmental 
organizations, think tanks, and public interest groups all have 
a say in the process, and that procedures that are in place to 
combat capture should address capture from any of the potential 
sources that can all get in the way of protecting and improving 
the public interest.
    And in terms of procedures and mechanisms in place to 
prevent capture, what I saw in my time in Government is 
obviously you have the APA, the Administrative Procedures Act, 
which is supposed to inject sunshine into the entire process. 
It gives specific amounts of times for regulations to be out 
there, for Notice of Proposed Rulemakings, Advance Notice of 
Proposed Rulemaking, et cetera, and also requirements about 
meetings with outside influences to be put in the record or in 
the Federal Register. We know the Obama administration has 
actually increased some of those requirements. Any meetings 
with lobbyists, whether they be from industry or outside, need 
to be made public, and the full transcripts need to be put in 
the record. And I think those are important mechanisms.
    I also want to put in a good word for the staff at OIRA, 
the Office of Information and Regulatory Affairs. They are the 
staffers at the Office of Management and Budget who have 
oversight over all the regulations, and they are very good at 
what they do, and they are by very nature designed to prevent 
capture because they do not work for the specific agencies that 
are doing the regulating. They do not work for the regulatory 
agencies. They work for OMB and they have overall oversight, 
and I think they are helpful in the process.
    Then obviously you have political appointees who are 
supposed to provide some oversight into the process as well and 
make sure that the public interest is being served. And then, 
of course, the career staffers. Now there is a lot of talk 
about the career staffers, whether they are captured, whether 
they are beholden to industry. I know that in my time in 
Government, it was very rare that people thought that they were 
specifically beholden to industry, and you often have people 
speculating whether career staffers are either pro-Democratic 
or pro-Republic or pro-business or anti-business. But what I 
found in my time in Government is that career staffers do have 
a bias, and their bias is in favor of their own agency. This 
bias is designed to make them protect the interests and the 
prerogatives of their agency. Sometimes it means they may have 
a narrower view, and that is why the overarching view or the 
wider view of either the political officials or of the OIRA is 
important and helpful, but they do have their agency's interest 
in mind.
    Of course, there is also external oversight. You have 
Congress, the Inspectors General, the GAO. And then another 
layer on top of that is the press, which is supposed to make 
sure that these problems are not taking place, and they will 
highlight it if there are problems, and believe me, you will 
hear about it, and they will do so with glee.
    In acting about this issue of capture, there are two things 
to watch out for. First, expertise is needed. You need to have 
people who know about the systems that they are regulating, and 
whether they come from industry or NGO's or public interest 
groups or unions, they bring to Government preconceptions with 
them, but they also bring expertise. And it is their job and 
obligation, once inside, to drop the preconceptions, but also 
maintain the needed expertise.
    And then, last, I would say that regulatory capture is also 
potentially a two-way street, that sometimes you see in the 
FDA, for example, that the industry folks are so terrified of 
their regulators that they will not call out the agency even if 
it appears to overstep its bounds because they know that the 
agency has life-or-death power over their own industry and 
their own company.
    In conclusion, Mr. Chairman, I will just say that I found 
the system is not perfect, but there are also key actors, 
especially the staff at OIRA, who are aware of the flaws in the 
system and work very hard to try and make sure that we are not 
brought down by those flaws.
    Thank you very much for this opportunity.
    [The prepared statement of Dr. Troy appears as a submission 
for the record.]
    Chairman Whitehouse. Thank you very much, Dr. Troy.
    I am going to be here, obviously, until the end of the 
hearing, so I am going to yield shortly to Senator Kaufman. But 
I did want to open with one point. When we have a panel of 
witnesses--I have read carefully through all of your testimony, 
and I like to try to identify the places in which everybody 
seems to agree, and I found in your testimony six areas that I 
believe are areas of common agreement.
    The first is that this problem of agency capture is a 
widely accepted phenomenon, to quote Dr. Troy's testimony just 
now, ``a real phenomenon.'' Professor Bagley cited, you know, 
Stigler, Huntington, Posner. There is a wide array of very 
prestigious names that for decades have accepted that this is, 
again to quote Dr. Troy, ``a real phenomenon.''
    The second is that there is a lot at stake here for the 
regulated industries. This is a matter of millions, tens of 
millions, even hundreds of millions of dollars in some cases.
    The third point is that there is a mismatch out there, 
whether you describe it as an enormous organizational 
advantage, the way Professor Bagley did, or describe that 
certain actors do have greater interest and put more effort 
into the process, as Dr. Troy did.
    The fourth is that some of the mechanisms of administrative 
procedure lend themselves to abuse, and, therefore, the system 
can be gamed.
    The fifth is that regulatory capture is by its nature done 
in the dark and done as quietly as possible. No one plants a 
flag when they have captured an agency. In fact, they will do 
their utmost to deny it.
    And, finally, it is that the potential damage from agency 
capture, as MMS and the SEC have shown, can be huge, both in 
terms of the violation of Government principles, of openness, 
candor, and responsiveness to the electorate and all of that, 
but more to home in terms of the terrible potential outcomes 
that the gulf has seen and that families in Rhode Island and 
across the country have seen as the tsunami of misery that 
flowed out from the Wall Street meltdown, hit town after town, 
city after city, county after county.
    So I think that we actually have a certain amount of common 
agreement here despite the fact that we have a diverse panel of 
witnesses, and I just wanted to lay that out there. We can talk 
more about that when it is my time.
    I will yield now to Professor Kaufman--to Senator Kaufman.
    Mr. Shapiro. What a demotion.
    Senator Kaufman. No, not really.
    I think that is excellent, presenting that, and it really 
is amazing when you start reading about this how unanimous it 
is about this is a great concern and how difficult it is to 
    Professor Bagley, you said that most agencies are able to 
resist capture admirably. Could you start and then each one of 
you give an example of one or two poster--what you think are 
kind of the poster children in agencies that were able to 
resist regulatory capture?
    Mr. Bagley. I can certainly speak in general terms. I think 
very few people believe that the Federal Trade Commission is a 
subject of capture. They have a professional staff. They take 
their jobs very seriously.
    I think that, generally speaking, EPA has not been subject 
to capture, although it has been clearly subject to political 
influence from the White House, but I think the staff there 
is--again, they are professional. They act with integrity. They 
care deeply about the values that their agency espouses. And I 
think like most Government officials, they do their jobs well.
    Senator Kaufman. Professor Shapiro.
    Mr. Shapiro. This is really going to sound like an academic 
answer, and I do not mean it to be. But first we have to decide 
on what we mean by capture, and I think I have a slightly 
different concept of capture than perhaps the other two 
    I agree with Dr. Troy that when a conservative President 
takes office, he or she is entitled to appoint administrators 
who reflect that President's point of view. And so as a result, 
for some of us we see agency performance which is less robust 
than would be my personal political preference. But that is the 
way of the system.
    Senator Kaufman. Yes, and I would like to say I totally 
agree with you on that. So what I would like to focus in on is, 
you know, just the--not the fact that there are differences in 
the rest, but an agency that you think, using your examples of 
regulatory capture, the three kinds, an agency that is pretty 
well, you know, fought it off.
    Mr. Shapiro. Well, that is right. So what we are talking 
about are instances where the political administrators seek not 
to move the ball down the field, albeit in their particular 
policy way, but do not move the ball at all or toss it 
backwards. You know, to what extent can agencies resist that? 
And I think that of all the agencies EPA has been the most able 
to do that, and I think there are two reasons for it: that 
among the agencies we are talking about, although they are all 
short on funds, it is probably the best financed and has the 
biggest professional staff. And I think that both of those 
things go well towards its ability to fight off this because it 
has a dedicated staff who attempt to fight it off.
    Senator Kaufman. Thank you.
    Dr. Troy.
    Dr. Troy. Yes, thank you for the excellent question, 
Senator. I would turn it around a little bit and say that for 
me to pick one agency would make it sound as if I think that 
the majority of the rest of them are----
    Senator Kaufman. No, no. By the way--no, let me----
    Dr. Troy [continuing]. Subject to capture, so I--I just 
want to make it clear that I----
    Senator Kaufman. Let me stipulate the fact that this is 
not--you are not saying that the rest of them are all bad. What 
I am trying to do is kind of get the good agencies I have had, 
because I am not--you know, I look at it and I see some 
agencies that I am not happy with, but I would really like--
especially you, you have worked and so kind of--your view. No, 
by that I am not--I am stipulating the fact that these are just 
the shining stars, the 10s. There are loads of 9s out there, 
and 8s and 7s. But we are looking for the 10-pluses.
    Dr. Troy. Right. So that said, that I believe that most 
agencies do resist capture or at least have these 
countervailing forces that they are trying to prevent capture 
from any one place. But the FDA did a very good job. I know a 
lot of people criticize the FDA, and they get a lot of 
criticism from the industry, but also from Congress and also 
from the public interest groups. So they are sort of hit on all 
sides, but I think that they do a very good job of trying to 
resist capture and base their decisions on sound science and on 
the public health.
    Senator Kaufman. And so what is the reason--I mean, 
Professor Shapiro gave his reasons. Why do you think those 
agencies--and spread it out a little, just successful agencies. 
What is it about them? Is it the structure of the agency? 
Funding is part of it, and staff is part of it. I think part of 
it, too, would be how big your job is. The Securities and 
Exchange Commission has a pretty big staff, but they have got a 
gigantic area that they are trying to cover, so it is kind of 
how--is that, Professor Shapiro, fair to say, that it is the 
staff, funding in relation to what the job is, right?
    Mr. Shapiro. It is also the adequacy of the regulatory 
statute, so some agencies I think are more easily captured 
because they are starting from a position that is, you know, 10 
yards behind where they want to be, so they are more easily 
captured because it is harder to get stuff done.
    Senator Kaufman. I think I am going to stop now. My time is 
up, and I will come back again. Thank you very much.
    Chairman Whitehouse. Senator Franken.
    Senator Franken. Professor Bagley, former Chair of the FCC 
Reed Hunt--and this is while he was Chairman of the FCC--once 
said that FCC stood for ``firmly captured by corporations.'' 
Like Mr. Hunt, I am deeply concerned about agency capture at 
the FCC.
    In June, public interest groups criticized the FCC for 
keeping them out of critical meetings that the agency held with 
executives at AT&T, Verizon, the National Cable and 
Telecommunications Association, Google, and Skype to work out a 
compromise on net neutrality legislation. What is your advice 
to advocates who do not represent a media conglomerate or a 
trade association who would want to be in meetings like that 
    Mr. Bagley. That is a good question, Senator.
    Senator Franken. Thank you.
    Mr. Bagley. I am not an expert on FCC practice, but I 
suspect that they should cultivate the kind of relationships 
that industry groups have cultivated over a long period of time 
with folk who work at the Commission. Obviously, they are going 
to be outmatched in that game in many respects. But it is only 
by being a consistent player and being diligent about efforts 
to bring your issues before the Commission that you are going 
to be successful.
    But I think the point that you are making is one that is 
largely intractable in the sense that these groups are going to 
be outmatched no matter what they do, and so it is really not 
up to them to help even the playing field. I think it is----
    Senator Franken. It is up to us?
    Mr. Bagley. I think it may have more to do with you. It may 
have more to do with the Commissioners and the FCC staff taking 
steps to ensure that the public interest is heard. But 
Congressional oversight is an enormous factor.
    Senator Franken. Well, I want to follow up with the FCC on 
this and maybe do this for Dean Shapiro.
    Another piece of evidence that I think that the FCC has 
been captured by corporations that it is supposed to be 
regulating is the fact that it has accepted unrealistic 
promises from the corporations that it is regulating without 
setting up mechanisms for enforcing those promises.
    Now, I go back to when the FCC was going through renewing 
fin-syn, the financial syndication regulations which limited 
the number of shows, programs that networks could own. And I 
remember during those hearings all the networks promised that 
if fin-syn was discontinued or was allowed to expire, they 
would not use this to favor their own programming. And they 
made all kinds of promises: ``Why would we favor our own 
programming? We are in the business of ratings. Whatever the 
best shows are, those are the ones we are going to put on.''
    Well, as soon as fin-syn was rescinded, boom, the word went 
out to the creative community, ``We are going to own the shows. 
And if you are an independent producer and you want a show on 
our network, you are going to have to give us ownership.'' And 
everybody knows this. And yet the FCC did nothing, and we are 
seeing the same thing now in this proposed Comcast-NBC/
Universal merger where they are promising all kinds of things, 
and I do not see any reason why anyone would expect that they 
would hold to those promises.
    Do you have any advice on how we can avoid the effects of 
this and how the FCC can avoid this or what we can do about 
    Mr. Shapiro. Well, if I had the solution, my books would 
sell better, but two things.
    First, the sort of classic administrative law solution to 
being excluded from the front end from the rulemaking is the 
opportunity, as Dr. Troy mentioned, to put evidence in the 
rulemaking record with which the agency has to deal and the 
courts will take a look at that evidence and see whether or not 
the agency has adequately dealt with it.
    As I mentioned in my testimony, the flaw there is that the 
public interest groups are often not well financed to even take 
that step, and there are lots of rulemakings where there are no 
comments whatsoever by the public interest community.
    Second, as you have put your finger on, as weak as the 
public interest groups may be many times in the rulemaking 
phase, their ability to monitor the enforcement phase, the 
actual implementation, is even weaker because there are no good 
administrative law solutions where they can come in and try to 
force the agency to actually implement what it has said it will 
    So the best I can come up with is, again, to suggest that 
we need to develop over time some sort of metrics to measure 
the performance of agencies, and an important aspect of those 
metrics would be what they do on the enforcement side and 
whether or not they actually enforce the regulations as they 
are written.
    Senator Franken. My time is up, but maybe we will get back 
to this because I want to get into the kind of--perhaps in the 
instance of a merger, that if it is allowed to go forward, the 
kind of rigorous conditions that can be placed on it and the 
setting up of mechanisms to enforce those conditions.
    Thank you, Mr. Chairman.
    Chairman Whitehouse. Before I return to Senator Kaufman and 
Senator Franken for a second round, I would like to go back to 
my six postulates, if you will, where I think we have 
agreement. It is a real problem. There is a lot at stake for 
the regulated industries, lots of motive, one might say. Three, 
the organizational advantage, mismatch. Four, administrative 
procedure can, in fact, be gamed. Five, agency capture is 
inherently done surreptitiously and, therefore, evades 
accountability and notice. And, finally, as we have seen from 
both MMS and the SEC, the potential damage to regular families 
and ordinary people and the well-being of our country is often 
vast when there is a very significant regulatory failure.
    So that is my hypothesis, that those six points are 
essentially undisputed by the panel. Professor Bagley?
    Mr. Bagley. That sounds right to me, Senator. I think that 
the core point that I would want to take away from our 
testimony today is that when you talk about agency capture, you 
are talking about a complex of problems whereby well-organized, 
well-heeled interest groups are likely to be able to bring a 
lot of pressure to bear on agencies under the cover of 
darkness. And there are a great many mechanisms that one might 
employ, depending on the agency and the bureaucratic and 
political realities on the ground. We will therefore want to be 
attentive to those differences as we look at different 
agencies. What works at the Department of the Interior may not 
work at the financial regulatory agencies.
    Chairman Whitehouse. Professor Shapiro.
    Mr. Shapiro. I also agree with all of those and, in 
particular, No. 6 about the potentiality of the damage.
    Going back to my OSHA example, for example, that is where 
OSHA took over 10 years to bring out this crane and derrick 
rule, which nobody opposed. In fact, it was the industry that 
petitioned the agency to try to update the rule. By OSHA's own 
estimates, each year there are 89 crane-related deaths and 263 
crane-related injuries each year. And OSHA has estimated the 
rule, which they finally adopted, would decrease that by 60 
percent. So, in other words, for every year the rule sat on a 
desk, 53 people died and another 155 were injured 
unnecessarily. So it is not only the big things, the gulf oil 
spill that everybody recognizes, but it is agency by agency in 
these small details of not doing what Congress has expected the 
agency to do.
    Chairman Whitehouse. Dr. Troy.
    Dr. Troy. First----
    Chairman Whitehouse. Your microphone.
    Dr. Troy. First I will turn on the microphone. But, second, 
I would like to commend you, Mr. Chairman, for trying to bring 
synthesis, for trying to find points of agreement, because I 
think that is a very useful way to proceed, especially in our 
often hyper-partisan environment that we have today. And I 
would say----
    Chairman Whitehouse. Not around here.
    Dr. Troy. But I would say that I can have agreement with 
the six points, but I would have to make slight amendments to 
some of the points.
    So, for example, when you say it is a widely accepted 
phenomenon, I agree it is a widely accepted phenomenon that it 
is attempted. I do not agree that it is always successful. I 
would certainly agree that there is a lot at stake for 
everyone, not just----
    Chairman Whitehouse. Yes, and I would amend my point. There 
is a constant pressure to do it, but it is not always 
    Dr. Troy. Right. Third, in terms of the mismatch, the best 
way, I think, to describe the mismatch is not between industry 
and non-industry actors so much as between interested and 
uninterested parties. I think that is where the real mismatch 
is. I think there are a whole bunch of groups, and I think your 
crane example is one where there are industry and non-industry 
forces that were interested in the derrick/crane rule, but the 
public did not care at all. And so this larger notion of the 
public interest is not represented. I would be interested----
    Chairman Whitehouse. Let me challenge that briefly, because 
one of the witnesses--I am not sure if it is one of the present 
witnesses or one of the witnesses who filed written testimony 
that we will put in the record--made this point which I think 
is pertinent to the point that you are making and runs a little 
bit counter to the point that you are making. That is, that 
there is a difference between an interested industry and an 
interested non-industry actor, like an NGO or a public interest 
group; and that is, that the interested industry, if they can 
make sure that the regulator does things the way they want, can 
achieve very substantial results that are of immediate benefit, 
very often of immediate financial benefit to them. And it is a 
100-percent proposition that the benefit that they get comes 
back to them in the form of real dollars, real cash, real 
value; and that the proposition is a little bit different for 
an NGO or another agency which is arguing on behalf of the 
public interest, because what any individual gets back is only 
their share of the larger public interest.
    And so there is an inherent mismatch in function between 
somebody who is arguing for a private interest and somebody who 
is arguing for a public interest in which they only share a 
small and proportionate piece.
    Dr. Troy. Sure, and I understand the point. But sometimes 
you have non-industry actors that have a financial stake in 
something. So, for example, if a labor union has a provision 
that they are pushing that will increase employment by members 
of their union, that is a financial stake that they have in the 
process. So I would say that it is wider than just----
    Chairman Whitehouse. You would agree with the principle 
that where there is a direct financial stake, that creates a 
mismatch in terms of motivation, but that that direct financial 
stake is not necessarily always on the side of industry.
    Dr. Troy. Yes, I would agree with that.
    Chairman Whitehouse. OK. Senator Kaufman.
    Dr. Troy. Can I finish the six points----
    Chairman Whitehouse. OK. I have gone over my time, so why 
don't we come back to it later and let Senator Kaufman proceed.
    Senator Kaufman. Why don't you finish the six points? I 
think this is very helpful.
    Dr. Troy. OK. The mechanisms that lend themselves to abuse, 
I think in all of your six points you kind of laid out what you 
were talking about, and I was not sure exactly what you were 
referring to with respect to the mechanisms that lend 
themselves to abuse.
    With respect to capture in the dark, of course, all 
inappropriate behavior takes place in the dark. I am reminded 
of Abbie Hoffman, who had his list of the ten people who got 
away with it, and there were nine named people, and the No. 1 
person who got away with it was the person you do not know 
about because you never heard about it. So, yes, of course, I 
would agree with that.
    Then the potential damage is vast. I agree with that, both 
for regulatory failure, as you were talking about, but also for 
poor regulations that do not manage the problem correctly and 
could impose huge costs.
    Senator Kaufman. Professor Shapiro, you talked about the 
fact that it is hard for people to monitor what actually 
happens once the regulations have passed. This was a question I 
was going to ask in another--but it really fits right here. 
Isn't that kind of Congressional oversight? I mean, isn't a 
major thing that allows regulatory capture to occur--and I 
would like each one of you to--the fact that--or be successful 
or not successful depend on how much Congressional oversight 
you have of the regulated--of the regulatory body and how much 
is focused on trying to deal with potential regulatory capture?
    Mr. Shapiro. Yes, of course. But Congress is also at a 
disadvantage to do oversight effectively. We have to know 
exactly what the agency has accomplished and has not 
accomplished. So if we had some sort of metrics, for example, 
if we knew that EPA is at 51 percent of accomplishing its 
statutory responsibility to provide clean air, and if we 
monitored that for a number of years, and they are either not 
moving forward or, worse, we are moving backwards, that would 
put Congress in a much better position to say we need to look 
at that.
    Now, it does not tell you why they are not moving forward, 
but at least it tells you they are not moving forward. And 
there is a blizzard of statistics on the EPA Website. There are 
thousands of studies and statistics, and I do not think anyone 
can make any sense out of them. There are just too many, and it 
is too confusing, and I think we need to focus on something 
that tells not only Congress but the American public what is 
going on.
    Senator Kaufman. Yes, but I think if you look at most of 
those, it is because people are looking at different ways. I am 
an engineer. I love the objective. I really do. I really love 
objective. But I find more and more when you are trying to do 
an oversight that the blizzard of statistics do not tell you 
what is happening. It is a subjective judgment you make as a 
Member of Congress with staff, with good staff, which we have 
and which committees have to look at that.
    But, Professor Bagley, what do you think in terms of the 
role of Congressional oversight in trying to assure that the 
regulations work for everybody?
    Mr. Bagley. I think if you examine capture where it occurs, 
it most often arises at those forgotten agencies, the ones that 
have no friend left either in Congress or in the public. And so 
the Consumer Protection Safety Commission is a notorious 
example of a captured agency. That is in part because it is 
very small, and although it has critical responsibilities for 
protecting consumers from products that might be defective, it 
has largely proven unable to match its industry counterparts.
    What is challenging about that, I think, is that, again, as 
I mentioned in my testimony, industry groups are also able to 
influence legislators. And so there are not going to be a lot 
of political gold stars for reforming some of those agencies. 
This is strictly a good-government problem, which means it is a 
hard problem to resolve, especially in a hyper-partisan 
environment. But I do think it is worth expending a fair amount 
of political capital to weed out the problem in an effort to 
protect the American public in the way that Congress, at the 
time that it enacted these statutes and created these 
commissions, intended.
    Senator Kaufman. Great. Dr. Troy.
    Dr. Troy. I think that the more attention that is paid to 
an agency, the less likely you are going to have this type of 
inappropriate behavior. I remember there was one time at HHS 
that there was a very obscure regulatory agency that came out 
with what was just a terrible regulation that nobody really 
knew about because it was such an obscure agency. The New York 
Times had a piece criticizing it, and then all of a sudden, 
people started paying a lot more attention, and we were able to 
correct the flaw, which would have actually harmed the goal of 
medical research.
    So I think that when more people are paying attention, you 
are apt to get better results.
    Senator Kaufman. I would propound a seventh agreement for 
the panel: Mr. Chairman, the fact that Congressional oversight 
is key in terms of keeping regulators on track and what they 
are doing.
    Chairman Whitehouse. It will be added to the list.
    Senator Kaufman. Thank you. I now feel vindicated.
    Professor Shapiro, can you go back? In the crane incident, 
it sounded to me like that was just kind of bureaucratic 
arteriosclerosis as opposed to interest group. Was this 
something where the crane industry held it up? Or what do you 
think was the cause of the crane problem?
    Mr. Shapiro. Funding.
    Senator Kaufman. Funding for the agency to go out and 
actually study what happened?
    Mr. Shapiro. Yes--no. Just funding to get the work done. 
There are just not enough bodies at OSHA to do what they need 
to do. For a book I just completed, we did a study of the 
budgets of the five major regulatory agencies, which would 
include OSHA. And with the exception of FDA, which has received 
modest increases because the pharmaceutical industry pays fees 
for drug approvals, all of the five major agencies have 
approximately 50 percent of the largest budget that they ever 
had in real dollar terms because of inflation, and none of them 
have received significant budgetary support for about 20 years.
    Senator Kaufman. I think that gets back to your original 
point about an administrative mind-set on whether you should 
have regulation or not and how robust it would be. One of the 
things to do is just squeeze the agency so it does not have any 
money to do what its function is.
    Mr. Shapiro. Yes.
    Senator Kaufman. OK. Thank you, Mr. Chairman.
    Chairman Whitehouse. Senator Franken.
    Senator Franken. First of all, I think when you were 
talking about the imbalance between the public interest and 
groups that are fighting for the public interest and private 
interests, was that from your testimony, your written 
testimony, Professor Bagley?
    Mr. Bagley. That is right.
    Senator Franken. What I found interesting about your 
testimony was how nuanced all of this is and how sometimes we 
can get--by painting things with a broad brush, we can miss 
things and kind of create stereotypes of capture that actually 
do not serve us very well. So I am really interested in how we 
in Congress can do the oversight and do it properly and--
because it seems like we get captured, too. We get captured by 
the industries that sometimes you will have an industry in your 
State that provides a lot of jobs, and your job is to represent 
your State and the people who work in your State. So you, of 
course, will want to help that industry. And you will be 
working very closely with that industry. So a lot of this gets 
very, very subtle.
    I think you also talked about capturing sort of 
subcommittees that are directly responsible and how we have to 
watch out for that.
    What I really would like to ask you all is how--put 
yourself in our shoes. How would you advise Members of 
Congress, I guess Members of the Senate, to best address the 
oversight of agencies and to best address agency capture so 
that we can do our jobs properly? What advice do you have for 
    Mr. Bagley. I have a few thoughts. I think an overall 
cautionary word is emphatically in order, which is this is 
going to be a tricky problem. I appreciated Senator Kaufman's 
analogy to cutting the grass every 2 weeks. It is a kind of 
regulatory hygiene that has to take place.
    One option would be to take the oversight responsibility 
away from the subcommittees. For example, this Committee 
oversees regulatory bodies across the administrative state. You 
may not make friends on the relevant subcommittee, but if you 
have concerns about an agency, there are investigations that 
you can run, there are reports that you can write about 
failures. And that allows you to avoid some of the capture 
problems because the industry groups that you may not want to 
tick off are not going to be the same industry groups that the 
Subcommittee members do not want to tick off. And so it is 
possible that by having a Subcommittee that has less of a 
passion about the particular industry, you might be able to 
make some improvements.
    I mention in my testimony a few different possibilities. 
One is to focus on funding. That is a recurring theme that you 
are hearing today, which is that agencies have not been funded 
adequately, and the lack of funding can make it very difficult 
to attract good people. It can make it very difficult to retain 
good people. It can make it very difficult to fend off 
overtures from industry.
    Another meaningful reform you could look at is going 
through the Federal agencies and looking at how they are 
structured. There are some that have built-in pathologies, and 
I mention in my testimony how several of the financial 
regulatory agencies receive funding from the groups that they 
    Senator Franken. Right.
    Mr. Bagley. Which is a problem because the groups they 
regulate can shop around for the most attractive charter.
    Senator Franken. There are two: the Office of Thrift 
Supervision and----
    Mr. Bagley. Sure. You heard during the financial crisis 
that there were banks that were seeking to convert their 
charters from national banks to national thrifts because they 
thought that OTS had a lighter hand. That is just--I mean, that 
is a fixable problem and the kind of problem that could be 
resolved by an oversight committee.
    Senator Franken. I think we fixed it in the reform bill by 
    Mr. Bagley. You eliminated OTS. There are still problems. 
    Senator Franken. Kind of a competition between the two 
agencies to be more lenient in order to get----
    Mr. Bagley. Right. There is still the remaining problem 
that banks can go from state to national charters, so there is 
still competition between regulators. But it is a step forward.
    There are lots of problems--there is a lot of low-hanging 
fruit in the regulatory state, and it will require some 
attention to detail. And, again, there are no political gold 
stars for this, but there are fixable problems that abound.
    Chairman Whitehouse. If I could follow up on that, one of 
the puzzlements about this is that this regulatory capture 
phenomenon has been known about for 90 or so years. It has been 
all over the academic literature. It has been part of what I 
learned in law school, you know, years ago. We have seen over 
and over again instances of it happening. We have had these two 
huge catastrophes recently to our country that seem very likely 
to trace back to episodes of regulatory capture. And yet on our 
side, there do not seem to be much in the way of efforts to set 
up any kind of consistent institutional either counterpressure 
or assessment mechanism to push back a little bit against or 
shed light on what I think everybody concedes is a relentless, 
constant, surreptitious pressure that needs to be looked out 
    Some of the testimony mentioned the Senate report that was 
done back in the 1970s, but other than that, this does not seem 
to be a very vibrant part of our debate around here. And when 
you look at the stakes and when you look at the catastrophic 
effects and when you look at the persistence of the problem, I 
am surprised that there has not been more work done on it. And 
you all have looked at it, you know, for a long time to varying 
    If we were to look back and say, OK, what are the sort of 
foundational reports and documents and studies that have been 
done in Congress to, you know, sort of stand on the shoulders 
of giants, where do we begin? Where is the best work that has 
been done in the past to flesh this out and come up with ideas? 
Is there that history of Congressional effort and oversight 
that we could look back to?
    It does not sound like it. Professor Shapiro.
    Mr. Shapiro. I think all this was done in disfavor about 
10, 12 years ago when Congress--more than that, I guess--de-
funded the Administrative Conference of the United States. And 
I am very happy that Congress recently has re-funded the 
Administrative Conference of the United States.
    During the years they were up and operating, they really 
served as a kind of neutral think tank inside the Government. 
The Conference had a staff. It would hire law professors to do 
studies. The Conference itself was made up of perhaps 150 
people from across Washington, leading lawyers, people from 
inside the Government, and at least as I was able to watch it 
work, I think it was a pretty objective attempt to figure out 
what works and what does not work. And now that it is back, I 
think you can take advantage of it.
    Chairman Whitehouse. Is that why it got de-funded?
    Mr. Shapiro. It is not quite clear why it got de-funded, 
but it showed up one year in the House appropriations with zero 
funding, and the Senate did not put it back. Then the ABA, the 
American Bar Association, fought for a long time to get it re-
funded, and it is now just beginning again.
    Chairman Whitehouse. Now, one of the themes that seems to 
have been developed also from all of you in your testimony is 
that in terms of whatever we wish to think about establishing 
in order to protect against or counter the pressure toward 
agency capture, it should not be something that is in the same 
agency as the one that is the target of the capture.
    Dr. Troy suggested that OMB might be a good location for 
the very reason that it is outside of the agency and is less 
vulnerable to being swept into whatever the politics are that 
have allowed the agency capture in the first place.
    Professor Shapiro, you have suggested the Administrative 
Conference, again, an outside entity.
    I do not know if you have spoken to this, Professor Bagley, 
but is this a common theme, that wherever we do this, it should 
be outside of the--if there is going to be an authority of some 
kind that has this task, it should be in a central location 
some place and can look across multiple agencies?
    Mr. Bagley. I would have two comments about that. The first 
is that some of the most compelling reports about agency 
capture that we have heard of come from Inspectors General.
    Chairman Whitehouse. From the IGs, yes.
    Mr. Bagley. Which operate in sort of an ``at the agency, 
but not at the agency'' capacity. The IGs have the 
investigatory resources and the know-how to ferret out some of 
these very difficult problems to see. They also have 
relationships with staff members, so they actually can be 
pretty effective voices in this process. Putting the experts in 
a centralized location may insulate them from some pressure----
    Chairman Whitehouse. But you will agree with me that 
Inspectors General vary from agency to agency in terms of their 
individual capability, their motivation, their willingness to 
tangle with the power structure.
    Mr. Bagley. That is absolutely true.
    Chairman Whitehouse. Some are great, some are pretty lousy.
    Mr. Bagley. That is exactly right.
    My concern with placing a super cop in OMB is just that to 
a hammer everything looks like a nail. And, in fact, a super 
cop may not have the kind of deep, fine-grained regulatory 
know-how to really get at the problem.
    One alternative is to create a super cop-type agency within 
OMB, but ensure that it is staffed, at least on a rotating 
basis, from the agencies that are the targets of high-profile 
investigations. So imagine for a moment that there was an 
agency within OMB that decided to look into sub-agencies within 
the Department of the Interior. Well, you would probably want a 
few people from Interior to come on over for a little bit to 
tell you what the score is, how things work.
    You do not want to give the responsibility to a bunch of 
generalists, especially a bunch of generalist lawyers who do 
not know anything about anything and would have a very 
difficult time----
    Mr. Bagley. Speaking as one. Who would have a very 
difficult time wrapping their hands around the problem. So we 
will want to be very attentive to ensuring that the kind of 
expertise necessary to find out if agency capture is occurring 
and address it where it exists.
    Chairman Whitehouse. Would a relationship between the 
central entity and the Inspector General of the agency be a 
good vehicle for getting that?
    Mr. Bagley. I think it could be. Again, as you caution, 
Inspectors General vary. Some are worthless, some are terrific. 
But you will----
    Chairman Whitehouse. The worthless ones might pick up their 
socks a little bit if they felt that they had the central 
agency looking over their shoulder on this.
    Mr. Bagley. That could be. You can also imagine a model 
where the central agency would visit IGs offices and bring 
manpower, resources, staff, and hard thinking to these 
particular problems. It will require money.
    Chairman Whitehouse. Senator Franken.
    Senator Franken. I am going to pick up where Professor 
Bagley is talking and ask Dr. Troy something, because you were 
talking just now about making sure that this entity that we are 
talking about would have expertise from the agencies they are 
investigating; and Dr. Troy talked about one of the--an area 
that I want to get at, which is kind of the revolving door, 
where you do need expertise in--let us say, there is a 
revolving door very often between defense contractors and the 
military, and you have people who are in procurement go to work 
for a contractor, and so you wonder whether while they are in 
procurement whether they are being extra nice to a contractor 
so that when they go to the contractor, will they get hired, 
and will they get hired at a very inflated salary? I mean, this 
is a real problem that we have. On the other hand, you need 
that expertise. That is a conundrum that I see, and I was 
wondering who here--and I will go to Dr. Troy first, if you 
have any thoughts about that in terms of how--there are 
cooling-off periods that we have. Are there any kinds of--what 
kind of thinking have you done about this kind of problem?
    Dr. Troy. Thank you, Senator. I agree that the cooling-off 
periods are very helpful. I think a lot of times Government 
officials who may think they have been nice to a certain 
industry, they leave and then they have a cooling-off period, 
and they realize that the industry may not want to talk to them 
anymore. So the cooling-off period can be very helpful.
    I know when I was leaving Government, the ethics rules were 
very strict that I could not talk to any prospective employers 
while I was still in Government, and I think that is a good 
    Also, when you are going back into Government, you are 
recused from dealing with anyone who has given you revenue, 
whether you were employed by them full-time or were consulted 
or gave a speech to them or wrote an article for them or 
whatever, for at least a period of a year. So I think all of 
those are important tools.
    I also think that the OIG is one arrow in the overall 
quiver of ways to prevent capture, so OIRA, which I am not sure 
I would call it necessarily a super cop, but OIRA looks at each 
regulation from a more macro perspective. The OIG looks at 
personal malfeasance often, violations of ethics rules, and I 
think that is very important. ACUS, as Professor Shapiro was 
saying, is more of a think tank and has more of a generalist 
approach without looking at the specific regulations per se. So 
I think you want to have a lot of arrows in your quiver in 
trying to fight against capture.
    Senator Franken. Professor Shapiro.
    Mr. Shapiro. Thank you. I am not sure I am sanguine about 
OMB and its role as kind of an independent adviser to Congress. 
OIRA, because of its economic perspective, has a very narrow 
sort of way of looking at regulation, and there are some very 
good empirical studies out there showing by and large most of 
the time it opposes stringent regulation on economic grounds.
    So I am not sure they have as broad a perspective as 
Congress might want, but you have your--I mean, I think 
Congress ought to control that, and the GAO would seem to be a 
perfect vehicle for more monitoring, and it is within your 
control. It has a fabulous record of professionalism, and you 
can direct it, and that is where I would put it.
    To answer your question, Senator, it seems to me the 
revolving door most of the time involves senior managers who 
were political appointees, and perhaps the best defense against 
the revolving door is the career civil service, and they are 
not doing so well, partly because of funding cuts and other 
problems which have been well documented, and building up the 
career civil service, kind of speaking truth to power, I think 
is also a way of getting at it.
    Senator Franken. I have got a little bit more time. 
Professor Bagley, I believe you also wrote about the cultures 
of agencies, and I was just wondering if you had any advice for 
creating a culture for the new director at the Consumer 
Financial Protection Bureau. You are starting a new bureau 
there. How do you create the culture that you want?
    Mr. Bagley. You need a dynamic, energetic, thoughtful, 
passionate leader of the organization to get it off the ground. 
I think that is absolutely critical.
    Senator Franken. I wonder who that could be.
    Senator Franken. Sorry.
    Mr. Bagley. I think it is important that the agency be 
given adequate funding to hire good people because that person 
certainly cannot do everything he or she needs to do without 
good people around on the ground.
    Really, it does come down, I think, to making sure that the 
agency receives the kind of political support from this body 
and from the House that it needs to get off the ground. The 
Consumer Product Safety Commission is a good analog, and the 
concern with the CPSC is that it just got forgotten. The real 
risk with a new consumer protection board in the financial 
sector, is that eventually, 2 or 3 years from now, we are going 
to be worrying about a different set of problems, and it is 
going to become politically not a worthwhile endeavor to 
oversee the agency carefully.
    Senator Franken. I think it was deliberately set up with a 
funding stream for that very reason.
    Mr. Bagley. That is exactly right, and I think that 
protecting funding streams at other agencies that have been 
beleaguered is one way to resolve the capture problem. But 
making sure that the agency is adequately funded, well staffed, 
and staffed by a vibrant leader is extremely important.
    Senator Franken. Thank you.
    Thank you, Mr. Chairman.
    Chairman Whitehouse. Just to respond to what you said, 
Senator Franken, esprit de corps I think has a lot to do with 
it. You see wonderful esprit de corps in the military. Within 
the elite units of the military, you see it even more 
pronouncedly. I noticed it during my time at the Department of 
Justice. That is a group of individuals who take enormous pride 
in the institution that they serve, and one of the 
demonstrations of it was that episode that we heard about in 
this Committee, in the Judiciary Committee, when the President 
of the United States and the Vice President in the White House 
put immense pressure on the Department of Justice to approve 
the warrantless wiretapping program when Deputy Attorney 
General Comey and Attorney General Ashcroft had reached the 
determination that it was not, in fact, lawful. And that went 
to a face-to-face confrontation between the President and the 
Acting Attorney General in the White House and led to that 
bizarre scenario of the White House Counsel and Chief of Staff 
going to visit Ashcroft in the hospital as he was significantly 
disabled by his illness, and the head of the FBI and the Deputy 
Attorney General, Acting Attorney General, both racing with 
their lights on to the hospital with instructions called ahead 
by the FBI Director to his FBI agents guarding the Attorney 
General of the United States saying, ``Don't let the Attorney 
General of the United States be left alone with the White House 
Counsel and the White House Chief of Staff.'' It was almost an 
episode from a country other than ours.
    Senator Franken. Well, it looked like ``The Godfather,'' 
Michael moving his Dad.
    Chairman Whitehouse. Yes, but that kind of thing shows that 
intensity of esprit de corps and the fact that not only was 
Comey willing to step down if the pressure came on from the 
White House, but six or seven of the senior members of the 
Department of Justice were willing to resign with him to show 
that they simply are not--that ``This is an organization that 
you do not mess with, Mr. President, and now you are messing 
with us.'' That kind of a spirit I think is important to----
    Senator Franken. But if I may, I think we did see that 
Department later in that administration deteriorate to the 
point where they were doing some things----
    Chairman Whitehouse. With the U.S. Attorneys.
    Senator Franken. Yes.
    Chairman Whitehouse. It is not bomb-proof, but I think 
esprit de corps matters.
    I wanted to touch base on a couple of the things that, as 
you said, there are a whole bunch of different vehicles--I 
think everybody has said this--through which regulatory capture 
can take place. Some are pretty obvious and pretty obviously, 
you know, either unlawful or reprehensible or in violation of 
ethics rules: direct financial inducements to people, trips, 
travel, free meals, all that sort of stuff. You can get at a 
certain amount of that just through the ethics laws and 
reporting. It still happens. It is one device. But it has its 
own way of trying to stop it.
    Then you have got the revolving door problem, which is both 
revolving industry folks in and then for the folks who are in, 
holding out the inducement that they can revolve out to a cushy 
job in the industry.
    Then you have got the problem of the ability of a highly 
motivated and very wealthy participant in the process to simply 
swamp the regulatory process, just bury it, so that public 
sector enterprises that do not have those same resources and 
that have to spread their resources across a variety of issues 
simply cannot keep up, and they just get left behind by the 
sheer expenditure.
    Then you have got the sort of gentle cajoling of ``If you 
do it my way, everything is going to be fine, and we can move 
on to something else. And if you do not, well, you know, we are 
going to take you to court and you are going to have to testify 
and there is going to be litigation and it is going to slow you 
down and people are going to complain. Do it my way. Let us 
just be nice about this.''
    That gets very hard to pick out because, frankly, that is 
very legitimate behavior, and you really have to sort of go 
into the motivation, into the mind of the person who is 
pursuing those strategies to determine whether there is an 
abuse of the process or a legitimate use of the process.
    Then there is the whole issue of political interference. Do 
you get your budget cut if the White House is mad at you 
because you are not playing along with their folks? Do you get 
your budget cut because Congress is mad at you because you are 
not playing along with their folks? Are you getting calls from 
the chief of staff giving you hell about what you are doing or 
encouraging you? Do you get flown home on Air Force One and get 
your picture taken with the President? You can put it on your 
desk and show how important a person you are if you go along 
with the program.
    I mean, there is just this whole array of threats and 
inducements, and it strikes me that trying to go at this 
problem by trying to identify all those different vectors for 
regulatory capture and manage each one of them on the input 
side may be very challenging and that you may want to look at 
the output side. Again, that creates its own measurement and 
metrics problems, but basically what is coming out of this 
agency? Is it really doing its job? Are you seeing continued 
casualties from cranes, you know, and look to the result that 
you are seeking, is that a good metric trying to bring to this 
equation? Or is it too vague, do you think? Professor Shapiro.
    Mr. Shapiro. No, it is not going to be easy. But at the 
moment we do not do it at all, so it is surprising what 
sometimes is basic level information, what that can reveal. And 
because we are not capturing that information in any kind of 
straightforward way and making it accessible--this information, 
if we could come up with some decent metrics--and that would be 
hard. You could put it on the Web. Citizens could follow this. 
You know, is the thing going up or is it going down? And it 
would be misleading. I mean, there is no metric that is going 
to capture perfectly what is going on. But that would not be 
the aim. The aim would be to have some basic indicators that 
are at least accurate enough to suggest whether the agency is 
moving forward and trying, despite various hurdles, to do its 
job or whether it is not doing anything. And if we could tease 
out those metrics, I think that would be helpful.
    Mr. Bagley. I think looking at outputs is certainly 
important. That is what we care about. And if we were able to 
measure effectively whether those outputs were skewed by 
industry group pressure, we would care a lot about that. But I 
am a little skeptical that in every case we are going to be 
able to do that.
    And just as you would not try to figure out if somebody had 
committed a bank robbery by looking at just whether or not he 
had a big influx of cash, you would instead ask: What was he 
doing on the day of the bank robbery? You might want to look at 
the inputs. You might want to find out both parts of the story 
before you started casting stones about agency capture.
    I go back to a point that I made in my testimony, and I 
think to me it strikes me as a promising avenue, which is doing 
your utmost to eliminate the conditions in which capture can 
thrive as opposed to trying to put the genie back into the 
bottle once it comes out. And there are several techniques and 
approaches you can employ to do that. One is enhance the 
prestige of Government employment and enhancing the kind of 
esprit de corps that is an enormous bulwark against capture. 
You can look at the structural infirmities of agencies and 
their funding streams. And you can take steps to enhance the 
ethics restrictions and close the revolving door.
    But I am not sure why you would exclude anything from your 
examination of the problem. It is a multi-faceted problem. For 
one example, we first learned about the problems at MMS not 
because of outputs, although we had one very large output 
recently, but we first learned about the problem because of 
inputs and reports that arose out of Colorado about 
inappropriate contacts between oil industry and the people who 
were managing the leases.
    So we will want to think about all aspects of the problem 
as you move forward. It is a tough problem, and we do not want 
to artificially limit ourselves.
    Chairman Whitehouse. But adding outcomes measurement, to 
the extent it----
    Mr. Bagley. Absolutely.
    Chairman Whitehouse.--would be a valuable addition?
    Mr. Bagley. Sure.
    Chairman Whitehouse. Senator Franken.
    Senator Franken. Well, you were just mentioning esprit de 
corps, Professor Bagley, and when I made my impromptu opening 
statement, I talked about some things that happened during 
the--that I saw that happened during the Bush administration, 
where I think esprit de corps seemed to be hurt in a number of 
agencies. I talked about FEMA and what appeared to be--and I 
think it is hard to argue with the perception that there was 
cronyism going on there. And to the extent that so many of the 
people that were selected to do regulation in the Interior 
Department were lobbyists who had come directly from the 
industries that they were now regulating, what is the effect of 
that kind of cronyism on the esprit de corps within an agency?
    Mr. Bagley. It can be devastating, as reports about the 
Civil Rights Division of the Department of Justice attested to. 
There were many, many members of that Division who felt like 
the mission of the agency had been distorted. There are many 
who disagreed with that assessment, but I definitely know that 
on the ground there was a loss of confidence and faith in the 
agency as an institution. This is troubling given that esprit 
de corps and the cohesiveness of an agency are important 
bulwarks against industry influence, against passivity, against 
sclerosis, against a host of well-known agency pathologies. We 
would certainly want to pay attention when, for whatever 
reason, an agency started to look sick, especially when the 
civil servants start revolting. You saw this at a number of 
agencies during the last administration, and that should be a 
canary in the coal mine for Congressional overseers.
    Senator Franken. And why did that happen in the last 
administration? I mean, you were also talking about funding, 
and I think there was de-funding of certain agencies during 
that period. And is there--if an administration and the 
Congress have sort of an anti-regulatory bias and are assigning 
people to head--the political appointees to the agencies who 
really do not want the agency necessarily to do its job, what 
happens then to the esprit de corps in the agency and what 
happens to the effectiveness of the agency? I will ask that of 
Professor Shapiro and then of Dr. Troy.
    Mr. Shapiro. Thank you, Senator. I guess I am going to 
disagree a little with Dr. Troy. He earlier described the staff 
as being biased toward the implementation of their statute, and 
to some extent that is true. I mean, if you go to work for EPA, 
you should be in favor of doing what EPA is supposed to do. But 
I think the empirical evidence shows by and large what is 
called neutral competence, that lawyers perform like lawyers 
and give candid advice to the political managers just in the 
way we would expect lawyers to do that, and scientists try to 
present the scientific evidence just as they have been taught 
to do when they get their Ph.D., which is to be as fair to the 
evidence as possible.
    So when you have a robust, effective career staff who were 
highly professionalized, then we get a kind of speaking truth 
to power that is a kind of protection against the revolving 
door and against political managers who would want to tilt the 
agency in a certain way because the staff is presenting them 
with evidence.
    Now, they may ignore the evidence, and if they do----
    Senator Franken. Didn't we see scientific language change 
in that period?
    Mr. Shapiro. Yes.
    Senator Franken. And is that an anomaly, or is that 
something that has happened frequently in the past?
    Mr. Shapiro. Fortunately, I think it was an anomaly, 
although it was--there were lots of examples of that, 
unfortunately, from the last administration.
    Senator Franken. OK. Dr. Troy, I will give you a chance to 
    Dr. Troy. First of all, I would like to just clarify what I 
was saying with Professor Shapiro. What I said is not that the 
career staff is biased toward the implementation of their 
statutes but toward the prerogatives of their agency and toward 
making sure that their agencies are not embarrassed. And to the 
extent that there is malfeasance in any administration or in 
any organization, I think that is harmful to the esprit de 
corps at an agency, and I think you in your remarks, Senator 
Franken, said that the problems of political appointees are not 
unique to any one administration, that sometimes you have bad 
actors. But overall I thought that the administration had very 
high standards for employing people, and generally the esprit 
de corps was very good. But when you do have problems like the 
ones that we have been talking about, malfeasance definitely 
can negatively impact the esprit de corps.
    Senator Franken. Thank you.
    Thank you, Mr. Chairman, for this hearing.
    Chairman Whitehouse. Thank you.
    There is one point I would like to come back to that 
Professor Shapiro made. I assume we will agree on some 
limitations around the point you made, but you said, in effect, 
that when a new President is elected, then there is an ability 
and a proper ability on the part of that President to bring 
their own political point of view, the one they were elected 
with, into the agency process. And I will concede that that is 
true, but I would also suggest that there is a floor below 
which that executive policymaking discretion cannot go.
    Mr. Shapiro. Absolutely.
    Chairman Whitehouse. And that that floor is one that is set 
by Congress when it passes a law and makes it the law of the 
United States of America that an agency shall or shall not take 
on a certain function, adhere to a certain standard, and so 
    Mr. Shapiro. I agree completely. I think there is a world 
of difference to a conservative administrator at OSHA adopting 
regulations to protect workers that might not be quite as 
robust as, say, the unions want but still are well within the 
legality of the statute; and an administrator at OSHA who 
stalls regulation for the 2 or 3 or 4 years that she or he is 
in office and nothing comes out; or an administrator who simply 
makes it impossible or very difficult for the agency to enforce 
the regulations that are then on the books. That is not a 
difference of policy. That is stonewalling.
    Chairman Whitehouse. Well, if anybody would like another 
round, I am happy to accommodate my colleagues, but we are 
close to closing time, and I wanted to put a few things in the 
record. I want to in particular thank the witnesses. I think 
that each one of you has been very helpful and has brought an 
important perspective to this hearing.
    My personal feeling is that this problem of agency capture 
deserves a great deal more attention than it is presently 
getting, and that given the constant pressure of industry in 
particular, although not necessarily, on these agencies and the 
organizational power mismatch and the huge stakes both in the 
short run, if you could win with the agency, and even greater 
consequences if the agency's failure results in a massive 
public catastrophe. We have known about this for decades. It is 
a recurring problem. There is no consistent, institutional, 
thoroughgoing vehicle for counterpressure. And I view this as 
an opening hearing that has tried to raise the profile a little 
bit of this agency capture phenomenon, look into its elements 
and its nature, the sort of topography of the problem, and 
begin to learn our way around it with a view that in future 
hearings and in future legislative efforts we can try to build 
an apparatus in Government that allows for adequate 
counterpressure so that the bubble goes back to the center 
rather than being pushed way over by all the pressure coming 
from ordinarily the industry, but I take Dr. Troy's point that 
it is not necessarily the industry.
    You know, I came out of a Foreign Service family, and I 
went to a lot of crummy and dangerous places as a kid, and the 
message that I took from that that my father and my mom were 
willing to take us there is that there is something more about 
this Government than just the convenience of, you know, the 
average American, that we stand for something. Everybody who 
serves in uniform in this country or has a family member 
serving in uniform understands that there is something that is 
extraordinarily important about the Government of the United 
    If you look at our history, this is the Government of 
George Washington, of James Madison, of Thomas Jefferson. It is 
the Government that Abraham Lincoln served, that Theodore 
Roosevelt served, that Franklin Roosevelt served, that John F. 
Kennedy served. It is an institution on this planet that is 
probably the greatest force for good on the planet, probably 
the greatest force for good ever on the planet. And the notion 
that some industry or some other private entity with a special 
interest could creep its way into the very fabric of that 
Government and take an agency of that Government and turn it 
away from the service of the public, away from the service of 
the country, away from the best interests of the United States 
of America and co-opt it to become its servant is to me very, 
very deeply offensive. That is something that everyone in 
America should be concerned about, upset about. And we talk 
about zero tolerance in other contexts. There really ought to 
be zero tolerance for that. The Government of the United States 
of America ought to serve the United States of America, and so 
I am pretty highly motivated to try to at long last begin to 
craft a solution to this problem. And as I said in my opening 
statement, if the financial meltdown and the catastrophe that 
we have suffered across this country has not taught us 
something about the importance of protecting our agencies 
against regulatory capture, if what happened in the Gulf has 
not taught us something about that, my gosh, are we ever slow 
    And the fact that these two have gone off does not mean 
that that is the end of it. It does not mean that there are not 
other agencies just as co-opted as MMS was, just as co-opted as 
the Securities and Exchange Commission was, where it simply has 
not blown up yet. And so I think for us to be about our 
business of trying to get this right and prevent those next 
disasters from happening, where the constants are always there, 
the constants of the pressure, the constants of the superior 
ability of the insiders, the constants of the massive transfer 
of wealth that is possible from successful agency capture, all 
of that does not go away. And we simply have to step up and be 
ready for it.
    As I said, this is an opening episode. I think the 
witnesses, each of you, have been extraordinarily helpful, and 
I really appreciate what you have done.
    I have a couple of things I would like to put in the 
record, if there is no objection. One is the statement of our 
colleague, Senator Feingold, who has put in a wonderful 
statement with a particular focus that has been developed a bit 
in this hearing, but that he focused more on, which is how this 
plays out in terms of our increasing reliance on Government 
contractors. He cites the Council of the Inspectors General on 
Integrity and Efficiency reporting recently that the total 
number of suspensions and debarments in fiscal year 2008 was 
half the total from 5 years previously and that suspensions and 
disbarments had been steadily decreasing over the last 5 years. 
So up in terms of the amount of Government contractors, up in 
terms of the money we spend on Government contractors, down in 
terms of suspension and debarments, which are at least one 
measure of whether we are looking at them. So I appreciate 
Senator Feingold's statement, and that will be added to the 
record without objection.
    [The prepared statement of Senator Feingold appears as a 
submission for the record.]
    Chairman Whitehouse. Wendy Wagner, who is the Worsham 
Centennial Professor at the University of Texas School of Law, 
has provided important testimony that has helped support what I 
mentioned earlier about the capacity for insider players to 
overwhelm agency procedure. She describes, ``For example, 
because the agency must respond to all comments, administrative 
law allows stakeholders with time and energy which generally, 
but not always, consists primarily of regulated parties, to 
effectively capture the agency by controlling their agenda, the 
framing of problems, the supply of information, and the issues 
on which the agency will be held accountable in the courts. 
Indeed, as this form of informational capture becomes more 
prevalent, it increases the costs of a rulemaking to the extent 
that only the most expert insiders can follow and process the 
information relevant to agency decisions.''
    She goes on to say, ``Aggressively gaming the system to 
raise the costs of participation ever higher will in many cases 
ensure the exclusion of agency watchdogs that lack the 
resources to continue to participate in the process.'' And I 
thank Professor Wagner for her testimony, and that will be 
added to the record.
    [The prepared statement of Ms. Wagner appears as a 
submission for the record.]
    Chairman Whitehouse. Hope Babcock, who is a professor of 
law at the Georgetown University Law Center, teaching courses 
in environmental and natural resources law, has offered 
testimony: ``If agencies allow themselves to become servants of 
the interests they are mandated to regulate, then their 
capacity to make balanced and broadly informed decisions is 
seriously compromised.'' And she has some good suggestions on 
how to make the process more transparent so that particularly 
adjudicatory licensing hearings and their heavy resource burden 
on public protestants are not used to keep the public 
participants out.
    [The prepared statement of Ms. Babcock appears as a 
submission for the record.]
    Chairman Whitehouse. The Consumers Union has provided a 
helpful statement, particularly with respect to the National 
Highway Traffic Safety Administration, what they describe as an 
``agency with a revolving door of regulators who left the 
agency to work for Toyota in safety matters before the 
agency,'' obviously relevant to the safety concerns we have 
seen recently about the Toyota automobiles.
    [The prepared statement of Consumers Union appears as a 
submission for the record.]
    Chairman Whitehouse. Professor William Snape has offered 
his statement from the Center for Biological Diversity at 
American University's Washington College of Law. He notes, ``A 
powerful combination of agency and industry rhetoric results in 
a deceiving mainstream `view' that the agency behavior at issue 
is either desirable or inevitable until the bubble literally 
bursts; e.g., we must increase oil drilling for national 
security, or the market will self-correct any artificial 
inflation of stock, bond, or derivative price.'' And he cites 
Judge Posner for some of his testimony.
    [The prepared statement of Mr. Snape appears as a 
submission for the record.]
    Chairman Whitehouse. Roger Williams University, my home 
State law school, has a statement from Dean David Logan, who 
teaches administrative law and tort law and sees regulatory 
capture as a problem that takes away from adequate public 
decisionmaking. His phrase is that it leads to ``serious 
corrosion of the regulatory system.''
    [The prepared statement of Mr. Logan appears as a 
submission for the record.]
    Chairman Whitehouse. And, finally, Professor Daniel 
Carpenter at the Harvard University Center for American 
Political Studies--he is the director there and the Allie S. 
Freed Professor of Government--writes to say, ``Let me say that 
I believe this issue to be one of the most vital policy issues 
of our times, perhaps the single most salient regulatory issue 
facing our Nation for the next 10 to 20 years.''
    [The prepared statement of Mr. Carpenter appears as a 
submission for the record.]
    Chairman Whitehouse. So I thank all of them for 
participating in this hearing through their written testimony. 
Since this is an ongoing process, we will continue to be in 
touch with them, and I want to particularly thank Senator 
Kaufman, who has been called away to his responsibilities at 
the Armed Services Committee, and Senator Franken for 
participating in this. As observers of this Committee will have 
seen, they are two of the brightest and most thoughtful and 
most sort of trenchant in their thinking Members of the Senate. 
The fact that they chose to spend their day with us, their 
morning with us today I think has been very valuable and 
helpful and instructive. So, Senator Franken, thank you very 
    The record of this hearing will remain open for one 
additional week for anybody who wishes to add anything to it. 
And, again, I thank our Ranking Member, Senator Sessions, for 
allowing us to proceed in his absence. We understand perfectly 
that, given the nomination of your Supreme Court Justice's 
successor, Professor Bagley, he has important work on the floor 
and an important meeting at the White House and, of course, it 
is perfectly understandable that he would be there rather than 
here. But he has been very courteous about working with us on 
the hearing and about allowing it to proceed in his absence, so 
I thank Senator Sessions as well.
    If there is no further business of the Subcommittee, we 
will stand adjourned. Thank you all very much.
    [Whereupon, at 11:55 a.m., the Subcommittee was adjourned.]
    [Submissions for the record follow.]

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