[Congressional Record Volume 157, Number 100 (Thursday, July 7, 2011)]
[Senate]
[Pages S4453-S4454]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. WHITEHOUSE:
  S. 1338. A bill to amend chapter 5 of title 31, United States Code, 
to establish the Office of Regulatory Integrity within the Office of 
Management and Budget; to the Committee on Homeland Security and 
Governmental Affairs.
  Mr. WHITEHOUSE. Mr. President, I rise to speak about two bills that I 
am introducing today to address a serious and persistent threat to the 
integrity of our government: regulatory capture.
  Over the last 50 years, Congress has tasked an alphabet soup of 
regulatory agencies to administer our laws through rule-making, 
adjudication, and enforcement. Protecting the proper functioning of 
these regulatory agencies has led me to the topic of regulatory 
capture. I held a hearing on the subject last year in the Senate 
Judiciary Committee and now am filing two bills that will make our 
government more resistant to the ever-growing power of special 
interests. I urge my colleagues to join me in passing these important 
good-government measures.
  At bottom, regulatory capture is a threat to democratic government. 
``We the People'' pass laws through a democratic and open process. 
Powerful interests then seek to ``capture'' the regulatory agencies 
that enforce those laws so that they can avoid their intended effect, 
turning laws passed to protect the public interest into regulations and 
enforcement practices that benefit limited private interests.
  This concept of ``regulatory capture'' is well-established in 
regulatory and economic theory.
  In 1913, Woodrow Wilson wrote this: ``If the government is to tell 
big business men how to run their business, then don't you see that big 
business men .  .  . must capture the government, in order not to be 
restrained too much by it?''
  The first dean of the Woodrow Wilson School, Marver Bernstein, wrote 
that a regulatory commission will tend over time to ``become more 
concerned with the general health of the industry,'' and try ``to 
prevent changes which will adversely affect'' the industry. This, he 
said, ``is a problem of ethics and morality as well as administrative 
method''; ``a blow to democratic government and responsible political 
institutions.'' Ultimately he said it leads to ``surrender'': ``The 
commission finally becomes a captive of the regulated groups.''
  Regulatory capture has been the subject of work by Nobel laureate 
George Stigler in his article ``The Theory of Economic Regulation.'' 
Students of administrative law know how well established the doctrine 
of ``regulatory capture'' or ``agency capture'' is in that field.
  Last year, a senior fellow at the Cato Institute wrote in the Wall 
Street Journal about ``a striking example of regulatory capture.'' He 
described the phenomenon this way: ``Agencies tasked with protecting 
the public interest come to identify with the regulated industry and 
protect its interests against that of the public. The result: 
Government fails to protect the public.'' His example was the Minerals 
Management Service, in relation to the BP oil spill.
  The failures of MMS in the lead up to the oil spill in the Gulf of 
Mexico, the cozy relationship between MMS officials and industry 
executives, and the shameful behavior of some MMS employees are 
archetypal symptoms of regulatory capture. But the report of the 
commission on the Gulf oil spill never mentioned ``regulatory 
capture.''
  That is a pretty strong signal that regulatory capture isn't getting 
the attention it deserves.
  When you think about the century-long academic and policy debate 
about regulatory capture, and when you look at the cost of recent 
disasters in areas regulated by the Minerals Management Service, the 
Mine Safety and Health Administration, and the Securities Exchange 
Commission, it seems pretty evident that Congress should be concerned 
not only about those prior incidents, but about addressing the threat 
of future regulatory capture. The experts I have spoken with in my home 
state of Rhode Island certainly understand that regulatory capture 
matters. They don't want a captured agency to allow the next oil spill 
or other man-made disaster to happen in our state, or for a financial 
agency to allow speculators to wipe out the savings of our citizens. 
Surely constituents of each of the members of this body would agree 
whole-heartedly.
  That is why I am introducing two pieces of legislation today.
  The first bill is called the Regulatory Capture Prevention Act. It 
would create an office within the Office of Management and Budget with 
the authority to investigate and report regulatory capture. The office 
would ensure that abuses were not overlooked, and sound the alarm if a 
regulatory agency were overwhelmed by a more sophisticated and better-
resourced regulated industry. Scrutiny and publicity are powerful tools 
for protecting the integrity of our regulatory agencies. This bill 
would employ them to prevent powerful interests from coopting our laws.
  The second bill is called the Regulatory Information Reporting Act. 
It would shed extra sunlight into regulatory agencies by requiring them 
to report to a public Web site the following: first, the name and 
affiliation of each party that comments on an agency regulation; 
second, whether that party affected the regulatory process; and 
finally, whether that party is an economic, noneconomic, or citizen 
interest. By centralizing this information for public and congressional 
scrutiny, the bill would create a simple dashboard for hints of 
regulatory capture in agency rulemaking.
  As the Senate considers these bills, we should remember how much 
agreement exists about regulatory capture. During the hearing I chaired 
on regulatory capture last year, all of the witnesses, from across the 
ideological spectrum, agreed on each of the following 7 propositions. 
First, regulatory capture is a real phenomenon and a threat to the 
integrity of government. Second, regulated entities have a concentrated 
incentive to gain as much influence as possible over regulators, 
opposed by a diffuse public interest. Third, regulated industries 
ordinarily have substantial organizational and resource advantages in 
the regulatory process when compared to public interest groups. Fourth, 
some regulatory processes lend themselves to gaming by regulated 
entities seeking undue control over regulation. Fifth, regulatory 
capture by its nature happens in the dark--done as quietly as possible; 
no industry puts up a flag announcing its capture of a regulatory 
agency. Sixth, the potential damage from regulatory capture is 
enormous. Finally, effective congressional oversight is key to keeping 
regulators focused on the public interest.

[[Page S4454]]

  With that as a starting point, I am hopeful that the Senate can agree 
on legislation to address this very real problem. Administrative law 
may not be the most glamorous subject, but I hope to work with 
colleagues on both sides of the aisle to eliminate regulatory capture.
  This is so important because for as long as there are regulatory 
agencies, regulated industries, and money, there will be efforts at 
regulatory capture. We owe it to our country to do everything possible 
to defeat such efforts to capture our government of the people, by the 
people, and for the people.

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