[Congressional Record Volume 163, Number 8 (Thursday, January 12, 2017)]
[House]
[Pages H428-H441]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
SEC REGULATORY ACCOUNTABILITY ACT
General Leave
Mr. HENSARLING. Mr. Speaker, I ask unanimous consent that all Members
may have 5 legislative days in which to revise and extend their remarks
and to submit extraneous material on H.R. 78, to improve the
consideration by the Securities and Exchange Commission of the costs
and benefits of its regulations and orders.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Texas?
There was no objection.
The SPEAKER pro tempore. Pursuant to House Resolution 40 and rule
XVIII, the Chair declares the House in the Committee of the Whole House
on the state of the Union for the consideration of the bill, H.R. 78.
The Chair appoints the gentleman from California (Mr. McClintock) to
preside over the Committee of the Whole.
{time} 1415
In the Committee of the Whole
Accordingly, the House resolved itself into the Committee of the
Whole House on the state of the Union for the consideration of the bill
(H.R. 78) to improve the consideration by the Securities and Exchange
Commission of the costs and benefits of its regulations and orders,
with Mr. McClintock in the chair.
The Clerk read the title of the bill.
The CHAIR. Pursuant to the rule, the bill is considered read the
first time.
The gentleman from Texas (Mr. Hensarling) and the gentlewoman from
California (Ms. Maxine Waters) each will control 30 minutes.
The Chair recognizes the gentleman from Texas.
Mr. HENSARLING. Mr. Chairman, I yield myself such time as I may
consume.
I rise in support of H.R. 78, the SEC Regulatory Accountability Act.
I thank the gentlewoman from Missouri (Mrs. Wagner) for leading this
effort in the House.
This bill is technically about something called economic analysis or
cost-benefit analysis. That may sound like Ph.D. economics, but it is
really about kitchen table economics because, Mr. Chairman, it is truly
about whether we are going to have a stronger economy--one that creates
good-paying jobs so that parents can afford to raise their children
today and these same children can have a brighter future tomorrow. It
is about making sure we have an accountable government that expands
personal opportunity, not government bureaucracy.
Mr. Chairman, I think we all know that small businesses are truly
America's job engine. They create nearly two-thirds of all new jobs in
our economy. Our economy works better for all when small businesses can
focus on creating jobs and on serving their customers rather than
navigating needless government red tape.
Unfortunately, for America's small businesses, bureaucratic red tape
has no better friend than the Obama administration. It has issued more
than 4,400 final regulations, with an astronomical cost to all of us of
$1 trillion. Just since the election on November 8, the Obama
administration had cynically issued 145 midnight regulations with a
cost of more than $21 billion.
For anyone who believes that this doesn't hurt our small businesses,
they need to listen to their constituents, because I certainly listen
to mine. I heard from a small business owner named Chris, who is back
in my district and who wrote me:
We have seen wave after wave of Federal regulations affect
our ability to grow. The costs associated with additional
reporting, auditing, and compliance are massive. The money
spent is significant and costs jobs and potential jobs.
Mr. Chairman, he is exactly right. The true cost of Washington red
tape cannot just be measured in dollars. The true cost includes the
jobs not created, the small businesses not started, and the dreams of
our children not fulfilled. Ill-advised laws like the Dodd-Frank Act
empower unelected, unaccountable bureaucrats to callously hand down
crushing regulations without adequately considering what impact those
regulations have on jobs.
As one former SEC Commissioner testified before the Financial
Services Committee, which I have the honor of chairing, these
Washington elites have forgotten the key to sensible regulation:
The most appropriate regulatory solution should be the one
that imposes the least burden on society while maximizing
potential benefits even if that means choosing not to
regulate at all.
Although the Securities and Exchange Commission is one of the few
Washington agencies that engages in at least some base level of
economic analysis, putting this requirement into law is definitely
preferable to current agency procedures. After all, the SEC's recent
interest in economic analysis came only on the heels of numerous
Federal courts throwing out some of its regulations because the
Commission failed to adequately take into account, again, the true
costs and benefits of its rules.
Passing this bill will erase any doubt that the Securities and
Exchange Commission must conduct sound economic analysis. It must
consider the impact of their rules on our jobs and our family budgets.
That is what cost-benefit analysis is all about.
Mr. Chairman, we may hear today from the usual suspects--the
opponents of this bill--that somehow this is meant to hinder the
rulemaking process and encourage litigation against the SEC. You will
hear these same people say, once again, that this is somehow dangerous.
Mr. Chairman, what is dangerous is being ignorant of the impact the
proposed regulations will have on our economy and on the American
people's wallets before they get implemented. That is what is
dangerous.
What is interesting, Mr. Chairman, is that Presidents, frankly, of
both parties seem to agree. Even Presidents Clinton and Obama directed
independent agencies to engage in, essentially, exactly the same
procedures that H.R. 78 would make into law. Such irony, Mr. Chairman,
that some Democrats will come to the floor today and oppose codifying
into law Clinton and Obama policy. Again, the irony of it all.
I urge all Members to join me in supporting this bill because we must
hold Washington accountable to the American people. We must build a
stronger, healthier economy so struggling Americans can get back to
work and achieve financial independence.
Mr. Chairman, I reserve the balance of my time.
Ms. MAXINE WATERS of California. Mr. Chairman, I yield myself such
time as I may consume.
Mr. Chairman, just as I opposed the bill before us today in the
previous three Congresses, I rise in opposition to it now. Republicans
have crafted H.R. 78 to tie the hands of the Securities and Exchange
Commission, the SEC, and to prevent it from issuing new rules to
address market failures and protect investors. At the same time, the
bill would enable the Trump administration to easily repeal important
Dodd-Frank rules by tilting the SEC's decisions toward what is best for
industry and, worse, what enriches the President-elect and his cronies.
Before I discuss H.R. 78, I think it is important to point out that
14 members of the Financial Services Committee, as well as the millions
of Americans they represent, are being denied the opportunity to
discuss this bill through hearings and markups. We are barely into the
second week of this Congress and the Republican leadership is
completely ignoring regular order--despite Speaker Ryan's declaration
less than a week ago of a return to regular order--by skipping the
committee process to bring this bill to the floor; but this is par for
the course.
In the other Chamber, Senate Republican leadership is similarly
jamming Donald Trump's conflicted nominees through the confirmation
process even before the FBI has completed background checks. And with
barely 10 days until his inauguration, Donald Trump has already given
up on ``draining the swamp'' and has broken his promise to hold Wall
Street accountable by nominating Wall Street insiders to nearly every
key economic and regulatory post.
Let me turn back to the problems with H.R. 78.
[[Page H429]]
During the past four Congresses, Republicans have sought to increase
the cost-benefit requirements that are related to SEC rulemakings even
though the Commission is already subject to stringent economic analysis
for which it is held accountable. Current law requires the SEC to
conduct the same economic analysis that is required of all agencies
under the Paperwork Reduction Act, the Congressional Review Act, and
the Regulatory Flexibility Act. Unlike other financial regulators, the
SEC has additional statutory requirements to study how its rules affect
market efficiency, competition, and capital formation.
Additionally, in 2012, the SEC voluntarily issued internal guidance
on economic analysis for rulemakings that closely follow Executive
Order No. 12866. Since adopting this guidance, the SEC has dramatically
expanded its economic analysis capabilities, including by increasing
the staff and the budget of its economics division by more than 300
percent over the last 5 years. In any other reality, the SEC would be
held up as a model of effective economic analysis.
When asked by Republicans in Congress to review the SEC's analysis,
the inspector general concluded:
We determined that the SEC's use of its current guidance
has been effective in incorporating economic analysis into
the rulemaking process.
H.R. 78, however, goes much, much further in radically directing the
SEC to no longer be concerned with the protection of investors. In
fact, the only reference to investors anywhere in the bill is in a
provision requiring the SEC to consider the impact these rules will
have on ``investor choice.''
The American public knows full well that ``investor choice'' is a
code for industry's wanting to offer a menu of predatory products, such
as subprime--toxic--mortgages or retirement products that are designed
to bankrupt low- and middle-income Americans and line the pockets of
Wall Street executives. Further suggestions that the bill is only
codifying the cost-benefit executive orders are false as the bill omits
one key provision from those orders: the prohibition of private rights
of action, which is simply the right to sue.
As a result, H.R. 78 provides industry with endless avenues to sue
the SEC and, thereby, puts pressure on the regulator to adopt the rules
it wants and to repeal everything else. What is worse, the bill is the
first signal to Wall Street that the SEC is leaving the enforcement
business. H.R. 78 provides no new funding for the SEC to address the
substantial, analytic, and potential litigation responsibilities the
bill would create even though the Congressional Budget Office estimates
that the analytical workload alone would cost $27 million.
Let's not fool ourselves that Republicans are going to increase the
SEC's funding. That is at the top of their agenda--kill the SEC by
taking away the funding that they need to be the cops on the block.
Members of Congress just finished debating a bill that caps the SEC's
sister agency, the Commodity Futures Trading Commission, at a woefully
inadequate funding level for the next 5 years, denying the CFTC the
hundreds of millions of dollars it needs to adequately police the swaps
markets.
Further, Donald Trump has nominated a lifelong defender of Wall
Street's to lead the SEC, which I can only assume means that Trump's
SEC will equally pillage the Commission's overworked enforcement staff
to help pay for the Republicans' planned repeal of Dodd-Frank.
{time} 1430
As President-elect Trump takes office next week, beginning what is
the most conflicted administration in U.S. history, I urge my
colleagues to join me, investor and consumer advocates, public pension
plans, civil rights groups, labor unions, and supporters of financial
reform in opposing H.R. 78 to ensure that the actions of Trump's SEC
are in the interest of America's economic stability and not in Russia's
or Wall Street's interests.
I am amazed that the Republicans can be so blatant, so noncaring to
come to us at this time with a bill that would basically take our cop
on the block, the SEC, and literally obliterate it. I am absolutely
amazed that they have the nerve and the gall to try this in face of
everything that we already know about what they have done to strip it
of its appropriate funding. But now with all of the debate and the
concern about Trump and Russia and everything that is going on, they
would come here with this bill today and try to pull this off.
I reserve the balance of my time.
Mr. HENSARLING. Mr. Chairman, I am very pleased now to yield 4
minutes to the gentlewoman from Missouri (Mrs. Wagner), the author of
the SEC Regulatory Accountability Act and the chairman of our Oversight
and Investigations Subcommittee.
Mrs. WAGNER. Mr. Chair, I thank Chairman Hensarling, the gentleman
from Texas, for his leadership on this issue and on so many regulatory
reform issues that we will be addressing this week and in the future.
Mr. Chair, I am proud to sponsor and bring to the floor H.R. 78, the
SEC Regulatory Accountability Act. This legislation fits perfectly with
the theme of the week here in the House to advance key regulatory
reform ideas as a change of pace from the outgoing administration.
For the past 8 years, the amount of regulatory burden that has been
placed on Americans and small businesses has been crushing. In 2015,
Federal regulation cost almost $1.9 trillion. That is nearly $15,000
per household in a hidden compliance tax.
The Obama administration issued over 600 economically significant
rules, which are those that have an economic impact of over $100
million. As a result of this wave of regulations, we have been part of
the slowest economic recovery in our lifetimes.
We now have an opportunity to enact policy that ensures smart
regulation going forward so that we are doing things in the best and
most efficient way. The people have spoken, Mr. Chair. Business as
usual in Washington is over and it is time to do things differently.
There is, indeed, a better way.
This legislation is really about what everyday Americans do when they
are making major life decisions in weighing the costs and the benefits,
the pros and the cons. Whether it is buying a car, buying a home,
deciding whether to take out a loan to go to school, everyone must
consider the core economic factors when making important life
decisions.
The SEC Regulatory Accountability Act places statutory requirements
on the SEC when issuing rulemaking that ensures that, first, they
identify the problem that regulation is trying to address; second, they
weigh the cost and benefits to ensure that the benefits justify costs
of compliance; and thirdly, they identify and assess whether there are
any available alternatives to rulemaking.
Additionally, this bill contains a provision that requires the SEC to
review its existing regulations every 5 years, at the minimum, to
determine whether any such regulations are outdated, ineffective, or
excessively burdensome, as well as requiring the SEC to modify,
streamline, repeal, or even to expand regulations based on that review.
As a regulator of our capital markets, the SEC has an immeasurable
influence on our economy and the ability of small business and
entrepreneurs to be able to access capital in order to innovate, grow,
and most of all, create jobs.
I strongly believe that this legislation is nonpartisan and common
sense and what our government regulators should have been doing in the
first place. The American people deserve a break from the irresponsible
regulation they have grown accustom to over the past 8 years. There is
a better way.
I ask my colleagues to support this commonsense piece of legislation
and urge passage of it through the House.
Ms. MAXINE WATERS of California. Mr. Chairman, I yield 3 minutes to
the gentleman from Texas (Mr. Gonzalez), a new member of the Financial
Services Committee.
Mr. GONZALEZ of Texas. Mr. Chairman, I support the regular review of
regulations to ensure that they are still relevant to our ever-changing
economy.
Unfortunately, the retrospective review requirement in H.R. 78 is
counterproductive and places heavy administrative burdens on the
Securities and Exchange Commission, an already overburdened and
underfunded regulator.
[[Page H430]]
Specifically, it required the Commission to review all of its rules
within 1 year of an enactment, and to constantly review its rules every
5 years thereafter, regardless of whether there is any cause for
concern with a particular regulation. I find this appalling.
That means the Commission will have to go back to 1934 and review
every single rule, even ones industry likes and rules that have made
our capital markets the envy of the world.
Today the SEC has a number of formal and informal processes for
intelligently identifying rules for review. For example, the Regulatory
Flexibility Act requires the SEC to conduct a 10-year retrospective
rule review, and the Paperwork Reduction Act requires periodic reviews
of information collection burdens.
Under the Regulatory Flexibility Act, the SEC publishes a plan to
look at rules that have a significant economic impact on smaller
businesses, inviting public comment on the rules, including how it
could be amended to reduce the impact of many small businesses within
my district and certainly around the country.
In addition, the SEC has been conducting several broad-based reviews
of rules on its own accord related to issuer disclosure, equity market
structure, and even the definition of what an accredited investor is.
As an already cash-strapped agency, the SEC, tasked with such an
onerous retrospective rule review required by H.R. 78, would be forced
to divert already scarce resources from other important tasks,
including policing the markets for fraud and stopping bad actors before
they can drain the life savings of investors and many retirees in my
district and around the country. This is our seniors we are talking
about.
Looking at the bill as a whole, it appears that this is the point of
the legislation: rather than have the SEC focus on its mission to
protect investors and support many small businesses, H.R. 78 focuses on
the burdens of the financial industry and repealing those rules.
I oppose this bill.
Mr. HENSARLING. Mr. Chairman, I yield 3 minutes to the gentleman from
Michigan (Mr. Huizenga), the chairman of our Subcommittee on Capital
Markets and Government Sponsored Enterprises.
Mr. HUIZENGA. Mr. Chair, I rise today in support of H.R. 78, the SEC
Regulatory Accountability Act, which would improve and strengthen the
SEC's rulemaking process by requiring more rigorous economic analysis.
What exactly does that mean?
Well, an economic analysis is quite simple, frankly. It is a systemic
approach to determine the optimum use of scarce resources involving
comparison of two or more alternatives to achieve a specific objective
under the given assumptions and constraints. That is a whole lot of
words and jumbo. But what we need to do is make a comparison, what is
going to be the benefit.
Economic analysis takes into account the opportunity costs of
resources employed and attempts to measure, in monetary terms, the
private and social costs and benefits of a project to a community, an
economy, or to an individual.
In its simplest terms, the SEC would have to determine the costs and
benefits of proposed regulations, as well as potential alternatives to
determine a best direction forward, basically ensuring that the SEC is
thoroughly assessing both the need for the regulation and adequately
evaluating the potential consequences, both intended and unintended,
and is there a benefit.
Mr. Chairman, requiring economic analysis by Federal regulators is
not a partisan issue. In fact, both President Clinton and President
Obama issued executive orders requiring regulators to ensure that their
rules were maximizing and achieving a net benefit.
H.R. 78, the SEC Regulatory Accountability Act, would ensure
consistent and effective application of the SEC's economic analysis
guidance by building on the bipartisan effort to strengthen economic
analysis requirements, as well as require a retrospective review of
existing regulations for independent agencies like the SEC.
Specifically, the bill would enhance the SEC's existing economic
analysis requirements by requiring the Commission to first clearly
identify the nature of the problem that would be addressed before
issuing a new regulation--too often, we are just shooting at a target
that we don't even know is actually a target--and to prohibit the SEC
from issuing a rule when it cannot make ``a reasoned determination that
the benefits of the intended regulation justify the costs of the
regulation.''
Additionally, H.R. 78 would require the SEC to assess the costs and
the benefits of available regulatory alternatives, including the
alternative of not issuing a regulation, and choose the approach that
would maximize the net benefit. The SEC must also evaluate whether a
proposed regulation is inconsistent or incompatible or duplicative of
other Federal regulations.
In testimony before the Subcommittee on Capital Markets and
Government Sponsored Enterprises last year, former SEC Commissioner Dan
Gallagher noted that the SEC Regulatory Accountability Act would
``promote and improve economic analysis at the SEC and make the agency
even more accountable to the investing public.'' He further testified
that this bill ``will help ensure the economic analysis conducted by
economists is firmly entrenched in every rulemaking the SEC conducts
under the Federal securities laws.''
The Acting CHAIR (Mr. Collins of New York). The time of the gentleman
has expired.
Mr. HENSARLING. Mr. Chair, I yield an additional 30 seconds to the
gentleman from Michigan.
Mr. HUIZENGA. Mr. Chair, I commend the gentlewoman from Missouri
(Mrs. Wagner) for introducing this important piece of legislation,
which will equip the SEC with the necessary tools to ensure that all
future SEC regulations will meet these standards with the ultimate goal
of achieving the SEC's statutory mission of protecting investors and
facilitating capital formation.
I urge my colleagues on both sides of the aisle to support this
important bill.
Ms. MAXINE WATERS of California. Mr. Chairman, I yield myself such
time as I may consume.
Let me point out how H.R. 78 tilts their decisionmaking process
toward Wall Street. First, let's go back and review everything the
President-elect said about Wall Street, and then we can understand
exactly what is being done here.
In August 2015, President-elect Trump told CBS: ``The hedge fund guys
didn't build this country. These are guys that shift paper around and
they get lucky. They make a fortune. They pay no tax. It's ridiculous,
okay?''
In January 2016, Trump told Iowans: ``I'm not going to let Wall
Street get away with murder. Wall Street has caused tremendous problems
for us.''
I repeat, he said: ``Wall Street has caused tremendous problems for
us.''
In February of 2016, Trump said: ``I know the guys at Goldman Sachs,
they have total control over Hillary Clinton.''
In July of 2016, Trump tweeted: ``Hillary will never reform Wall
Street. She is owned by Wall Street.''
He also told Iowans: ``I don't care about the Wall Street guys. I'm
not taking any of their money.''
Now, Trump has totally betrayed his promise to drain the swamp. He
has appointed Goldman Sachs bankers to the Treasury and the National
Economic Council, and his pick to head the Securities and Exchange
Commission is a lawyer whose career has been based upon defending Wall
Street, including Goldman Sachs. This legislation today is part and
parcel to that betrayal.
This is how you do it: cost-benefit analysis, you can attach this to
any and all monetary and financial services legislation. You can attach
it wherever you would like and, thus, cause the delays, cause the
undermining of legislation, put the SEC in the position where it has to
defend in court, costing them more money that they don't have because
they have denied them adequate funding.
{time} 1445
This is what this is all about. How do we get our Wall Street friends
and cronies back into the business, because Dodd-Frank began to deal
with them and to reverse some of what had been happening for far too
long. Now they come with this attack and they talk about cost-benefit
analysis. Mr. Chairman, this is what they are going to use to ride
their way back into making
[[Page H431]]
sure that they give the protection and the advantages to all of their
friends on Wall Street.
Mr. Trump was not about draining the swamp. He is about making sure
that there is a swamp, digging it deeper and wider.
I reserve the balance of my time.
Mr. HUIZENGA. Mr. Chairman, despite the personal attacks happening on
the floor here, I am glad to see that we are making real progress.
Apparently, we are making an impact here.
With that, I yield 1\1/2\ minutes to the gentleman from New York (Mr.
King).
Mr. KING of New York. Mr. Chairman, I rise in support of H.R. 78, the
SEC Regulatory Accountability Act. If passed, the SEC would be required
to follow President Obama's executive order that requires a thorough
cost-benefit analysis of new rules and a comprehensive review of
existing regulations. Under current law, the SEC must consider the
effect of its rules on ``efficiency, competition, and capital
formation,'' and weighing costs and benefits is necessary to meet this
requirement.
Cost-benefit analysis is not a new idea. Agencies have done this kind
of analysis for over 30 years. In fact, it is a bipartisan idea. In
1981, President Reagan issued an executive order requiring Cabinet-
level agencies to engage in cost-benefit analysis, which President
Clinton expanded with another executive order in 1993.
Unfortunately, independent agencies are not subject to executive
orders and those regulated by the SEC have suffered as a result. From
2005 to 2012, SEC regulations were overturned consistently by the
courts for inadequate economic analysis and unjustified costs. While
the SEC has taken steps to improve its rulemaking process, H.R. 78 will
ensure that future rules maximize economic benefit and companies do not
face unnecessary hurdles when they access our capital markets.
Democrats and Republicans often do not agree on policy, but I hope we
can agree on the need for a fair, transparent, and informed process.
I thank my distinguished colleague for introducing this vital
legislation.
Ms. MAXINE WATERS of California. Mr. Chairman, I yield the balance of
my time to the gentlewoman from New York (Mrs. Carolyn B. Maloney).
Mrs. CAROLYN B. MALONEY of New York. Mr. Chairman, I thank the
gentlewoman for yielding me the time.
Mr. Chairman, I rise in strong opposition to H.R. 78, the SEC
Regulatory Accountability Act. This bill would require the SEC to do an
absurd amount of time-consuming, duplicative cost-benefit analysis
before they can even propose a rule. This is the fourth time, Mr.
Chairman, that we are voting on this partisan bill because the previous
three times the bill has been rejected by the Senate and President
Obama has strongly opposed it.
But let's be clear about what this bill is not about. It is not about
ensuring that the SEC conducts a cost-benefit analysis on the rules. If
that were the case, then no legislation would be necessary. The SEC is
already required to conduct a cost-benefit analysis and has already
adopted internal guidance on economic analysis that mirrors the exact
requirements of this bill before us today. So the problem is not that
the SEC doesn't currently conduct cost-benefit analyses or that it does
it poorly; the real goal of this bill is simply to give the industry
more chances to sue the SEC on cost-benefit grounds when it issues
rules the industry does not like. That is essentially the only thing
that would change if this bill were signed into law.
The SEC's cost-benefit analysis would be the same, but the industry
would have more opportunities to sue the SEC over alleged flaws in the
cost-benefit analysis. And the threat of a lawsuit would force the SEC
to divert even more of its scarce resources to cost-benefit analysis,
which would delay the key reforms and undermine the SEC's ability to
protect investors--their core mission.
So I urge my colleagues to oppose this bill, as they have in three
previous votes before this body.
I reserve the balance of my time.
Mr. HUIZENGA. Mr. Chairman, I yield 2 minutes to the gentleman from
Arkansas (Mr. Hill), the whip of our Financial Services Committee.
Mr. HILL. Mr. Chairman, I thank the gentleman from Michigan for
yielding me the time.
Today I rise in support of H.R. 78, the SEC Regulatory Accountability
Act.
One can cut the hyperbole on the other side of the aisle with a knife
today because we are not here talking about gutting enforcement. We are
not here talking about exceptionally benefiting Wall Street operators.
What we are talking about is enhancing the SEC's cost-benefit process.
The Commission has made many positive strides toward its economic
analysis in the past few years. This bill will enhance their efforts at
ranking and providing resources to the rules that will in fact provide
investor protection and provide efficient, competitive U.S. markets.
Too many of their resources have been deviated on wild goose hunts
related to the Dodd-Frank mandates.
During this same time, we have experienced a sharp decline in initial
public offerings and public companies generally. Largely, in my view,
that is as a result of the regulatory burden and the costs associated
with being a public company. This should be a concern to every Member
of this body.
This bill would make the SEC's rulemaking process more accountable by
enhancing its cost-benefit analysis requirements and would require the
Commission to revisit its rules after implementation to ensure they are
actually achieving their intended purposes.
This bill does away with the notion that congressional mandates are
exempt from cost-benefit analysis and requires the Commission to
evaluate these rules as well--a good thing; Congress doesn't always get
it right--in addition to identifying alternatives which might even
include no rule at all, in short, using common sense.
Requiring this sort of more robust economic analysis will also help
the SEC set priorities. Chair White testified before our committee in
the past Congress that they have 50 front burners. They can't decide
what their most important agenda item is. Let's fix it, Mr. Chairman,
by passing this bill.
The Acting CHAIR. The time of the gentleman has expired.
Mr. HUIZENGA. I yield the gentleman an additional 30 seconds.
Mr. HILL. This bill will focus attention where attention is needed to
benefit investors, our capital markets, and the economy the most. H.R.
78, along with the HALOS Act that we passed in the House on Tuesday,
will help ensure that the SEC regulations do not unnecessarily impede
consumer and business access to capital.
I thank the chairman for the time. I appreciate Mrs. Wagner for her
work on this bill.
Mrs. CAROLYN B. MALONEY of New York. Mr. Chairman, I enter into the
Record the following letters of opposition to H.R. 78 signed by the
Consumer Federation of America, Americans for Financial Reform, the
California State Teachers' Retirement System, and the Council of
Institutional Investors. These institutions represent various groups
such as investors, consumers, public pension plans, labor unions, and
communities of color.
Consumer Federation
of America,
January 10, 2017.
Vote NO on H.R. 78, the ``SEC Regulatory Accountability Act''--Bill
Would Paralyze the Agency's Ability to Protect Investors and Promote
Market Integrity
Dear Representative: This week the House is expected to
vote on H.R. 78, the ``SEC Regulatory Accountability Act.''
The bill imposes burdensome new rulemaking requirements that
would prevent the agency from responding in a timely manner
either to emerging threats in the marketplace or to industry
requests for guidance or legal interpretations. As such, it
threatens to undermine the stability and integrity essential
to healthy capital markets, with harmful consequences for
investors, capital formation, and the overall economy. I am
writing on behalf of the Consumer Federation of America to
urge you to vote no when the bill is brought to the floor for
a vote.
The bill is being promoted as a measure to enhance cost-
benefit analysis at the Securities and Exchange Commission
(SEC). And, in that regard, certain of the bill's
requirements are relatively benign, such as the requirements
that the agency discuss the nature and scope of the problem
it is intending to solve when it engages in rulemaking,
carefully analyze available alternatives, and consider the
costs of the various alternatives as well as their relative
effectiveness in determining on a course of action. But these
are things the SEC already does, having learned the painful
lesson that failure to do so can result in its rules' being
overturned in court. Indeed, both the Government
Accountability Office and the SEC's Office of
[[Page H432]]
the Inspector General have in recent years praised the agency
for the extent and quality of its cost-benefit analysis.
Other of the bill's provisions are far more harmful. The
following are among the most serious problems with this
legislation:
It requires the agency to adopt, not the most cost-
effective regulatory approach, but the least burdensome
approach. As such, it prioritizes minimizing regulatory costs
over promoting regulatory effectiveness.
The bill requires the agency to consider a number of
specific factors in assessing regulations, including their
effect on efficiency, competition, and capital formation as
well as investor choice, market liquidity, and small
business. Not included are any specific requirement to assess
their impact on investor protection or market integrity,
stability, and transparency.
If the Conunission fails to address concerns raised by
``industry groups'' related to costs and benefits, it must
explain its reasons. There is no comparable requirement to
explain any decision not to address investor concerns.
It imposes these burdensome new requirements, not just on
regulations, but also on agency orders, interpretations, and
other statements of general applicability ``that the agency
intends to have the force and effect of law.'' Firms seeking
a timely response from the agency staff on issues important
to their business are likely to face significant delays if
the legislation is enacted.
It requires the agency to engage in a constant
retrospective review of all its regulations every five years,
regardless of whether there is any cause for concern with a
particular regulation. Since the bill doesn't include any new
funding authorization to provide for this review, and
Congress has been highly reluctant to provide funding
increases commensurate with the agency's workload, the
inevitable result is that the agency will be forced to take
resources away from other more important regulatory
priorities to fund this generally meaningless exercise.
While a reasonable and balanced analysis of costs and
benefits can promote effective rulemaking, this legislation
goes far beyond what is reasonable or balanced. It would tie
the SEC in procedural knots, keep its focus on an endless
review of existing rules rather than emerging issues, provide
endless grounds for legal challenge, causing a serious drain
on agency resources, and undermine the agency's focus on its
central mission of protecting investors and promoting market
integrity and stability. Indeed, the bill would exacerbate
rather than ameliorate the most serious short-comings in the
agency's current regulatory process--its inability to
complete rulemakings regarding pressing issues in a timely
manner.
For these reasons, we urge you to vote ``No'' when H.R. 78,
the ``SEC Regulatory Accountability Act,'' is brought to the
floor for a vote. The only ``accountability'' this
legislation promotes, is the SEC's accountability to the
firms it is supposed to regulate rather than the investors it
is supposed to protect.
Respectfully submitted,
Barbara Roper,
Director of Investor Protection.
____
AFR Americans for
Financial Reform,
Washington, DC, January 12, 2017.
Dear Representative: On behalf of Americans for Financial
Reform, we are writing to express our opposition to HR 78,
the ``SEC Regulatory Accountability Act''t6espite the fact
that the Securities and Exchange Commission (SEC) is already
subject to more stringent economic analysis requirements than
any other Federal financial regulator, and has greatly
increased its investment in economic analysis in recent
years, this legislation would impose a host of unworkable
bureaucratic and administrative requirements on the agency.
While they are justified using the rhetoric of ``cost benefit
analysis'', these requirements appear designed not to improve
SEC economic analysis but instead to make create major new
barriers to effective agency action.
The most prominent new requirement would mandate that the
SEC identify every ``available alternative'' to a proposed
regulation or agency action and quantitatively measure the
costs and benefits of each such alternative prior to taking
action. Since there are always numerous possible alternatives
to any course of action, this requirement alone could force
the agency to complete dozens of additional analyses before
passing a rule or guidance. Placing this mandate in statute
will also provide near-infinite opportunities for Wall Street
lawsuits aimed at halting or reversing SEC actions, and would
be a gift to litigators who work on such anti-government
lawsuits. No matter how much effort the SEC devotes to
justifying its actions, the question of whether the agency
has identified all possible alternatives to a chosen action,
and has properly measured the costs and benefits of each such
alternative, will always remain open to debate.
Like other agencies, the SEC is already required to conduct
economic analyses under the Paperwork Reduction Act, the
Congressional Review Act, and the Regulatory Flexibility Act.
Unlike all other financial regulators, the SEC also has
additional statutory requirements to examine how each rules
affect market efficiency, competition, and capital formation.
The SEC has also issued binding internal guidance on economic
analysis for rulemakings that closely follows Executive Order
12866 and OMB Circular A-4, and has more than tripled its
spending on economic and risk analysis since 2012.
Despite these already existing commitments to economic
analysis, this proposal would load the agency with a crushing
burden of additional administrative burdens under the rubric
of ``cost-benefit analysis''. In addition to the enormous
task of identifying and analyzing every available alternative
to a course of action, the agency would be required to
perform half a dozen new analyses in addition to its current
requirements concerning market efficiency, competition, and
capital formation. These new requirements include analyses of
effects on small business, market liquidity, state and local
government, investor choice, and ``market participants''.
Notably, no new requirements concerning the protection of
investors or preventing another financial crash are included.
This legislation also requires the SEC to review every
single regulation in effect within one year after the passage
of this Act, and again every five years thereafter, with an
eye to weakening or eliminating such regulations. This will
be an enormous drain on SEC resources and a distraction from
addressing emerging issues in our ever more complex financial
markets.
This legislation is transparently an effort to paralyze the
SEC and to empower Wall Street lawyers to overturn its
decisions, not to improve its analysis or decision making. We
urge you to reject it.
Thank you for your consideration. For more information
please contact AFR's Policy Director, Marcus Stanley.
Sincerely,
Americans for Financial Reform.
____
California State Teachers'
Retirement System,
January 10, 2017.
Re H.R. 78--SEC Regulatory Accountability Act.
Hon. Jeb Hensarling,
Chairman, House Committee on Financial Services, Washington,
DC.
Hon. Maxine Waters,
Ranking Member, House Committee on Financial Services,
Washington, DC.
Dear Chairman Hensarling and Ranking Member Waters: I am
writing on behalf of the California State Teachers'
Retirement System (CalSTRS) to express our concerns regarding
the SEC Regulatory Accountability Act--H.R. 78.
CalSTRS' mission is to secure the financial future and
sustain the trust of California's educators. We serve the
investment and retirement interests of more than 914,000 plan
participants. CalSTRS is the largest educator only pension
fund in the world, with a global investment portfolio valued
at approximately $193 billion as of November 30, 2016. We
have a vested interest in ensuring shareholder protections
are safeguarded within the U.S. Securities and Exchange
Commission's (SEC) rules and regulations, and thereby are
keenly interested in the rules and regulations that govern
the securities market. CalSTRS fully supports the mission of
the SEC, which is to protect investors, maintain fair,
orderly and efficient markets, promote competition and
facilitate capital formation.
As a long-term shareholder, and fiduciary to California's
teachers, we believe it is vital to avoid unnecessary
regulatory costs that could obstruct the efficiency of the
capital markets and the economy. CalSTRS relies heavily on
the SEC shareholder protections in allocating capital on
behalf of California teachers. However, CalSTRS is unclear on
how the provisions of H.R. 78 would improve the cost-
effectiveness of the SEC rulemaking process with the addition
of these cumbersome, unnecessary and seemingly duplicative
steps. As you know the Office of Inspector General, Office of
Audits (OIG) issued a report, Use of the Current Guidance on
Economic Analysis in SEC Rulemakings, which provided six
recommendations to strengthen the SEC's economic analysis
process. The report by the OIG found in its sample review
that the SEC ``followed the spirit and intent of the Current
Guidance as well as . . . justification for the rule,
considered alternatives and integrated the economic analysis
into the rulemaking process.'' The proposed ``SEC Regulatory
Accountability Act'' requires the SEC to address any
industry's or consumer group's concerns on the potential
costs or benefits in its final rule, including an explanation
of any changes that were made in response to these concerns
and if not incorporated, reasons why.
Since this report, the Division of Economic and Risk
Analysis (DERA) at the SEC has devoted considerable resources
to integrate the six recommendations, having already
addressed what is being proposed in the ``SEC Regulatory
Accountability Act.'' We fully endorse the SEC's current
process, which ensures a robust cost benefit analysis in
rulemakings. The SEC, DERA and Office of the General Counsel
are highly committed to a cost effective rulemaking process
as evidenced by the current diligent economic analysis in the
SEC proposed and final rulemakings.
The proposed amendments to Section 23 of the Securities
Exchange Act of 1934 through H.R. 78 are unnecessary as DERA
currently fulfills the actions outlined in this bill. We
believe H.R. 78 is redundant and unneeded
[[Page H433]]
with the steps already taken by the SEC in their economic
analysis processes. Also alarming is that H.R. 78 is being
brought directly to the House Floor for action without any
consideration or vetting by the Committee on Financial
Services. CalSTRS does not support circumventing the vetting
process with an immediate vote, bypassing comprehensive
safeguards. If this this bill is pushed through an immediate
vote, we are concerned important rulemakings to enhance
investor protection will cease at the SEC, thereby impacting
shareholder protections and the mission of the SEC.
We respectfully ask that our views be entered into the
record. We would be happy to discuss our perspective on this
issue with you or your staff at your convenience. Thank you
for your consideration.
Sincerely,
Jack Ehnes,
Chief Executive Officer.
____
Council of Institutional Investors,
January 11, 2017.
Hon. Paul D. Ryan,
House of Representatives,
Washington, DC.
Hon. Nancy Pelosi,
House of Representatives,
Washington, DC.
Dear Mr. Speaker and Minority Leader Pelosi: I am writing
on behalf of the Council of Institutional Investors (CII).
CII is a nonprofit, nonpartisan association of public,
corporate and union employee benefit funds, and other
employee benefit plans, foundations and endowments with
combined assets under management exceeding $3 trillion. Our
member funds include major long-term shareowners with a duty
to protect the retirement savings of millions of workers and
their families. Our associate members include a range of
asset managers with more than $20 trillion in assets under
management.
The purpose of this letter is to express our opposition to
H.R. 78, which we understand is likely to be considered on
the floor of the U.S. House of Representatives (House).
As an association of long-term shareowners interested in
maximizing long-term share value, CII believes it is ``vital
to avoid unnecessary regulatory costs.'' However, it is not
clear to us how the provisions of H.R. 78 would improve the
cost-effectiveness of the U.S. Securities and Exchange
Commission's (SEC or Commission) existing thorough rulemaking
process or somehow benefit long-term investors, the capital
markets or the overall economy.
SEC's Existing Economic Analysis is Extensive
The Commission's rulemaking process is already governed by
a number of legal requirements, including those under the
federal securities laws, the Administrative Procedure Act,
the Paperwork Reduction Act of 1980, the Small Business
Regulatory Enforcement Fairness Act of 1996 and the
Regulatory Flexibility Act. Moreover, under the federal
securities laws, the SEC is generally required to consider
whether its rulemakings are in the public interest and will
protect investors and promote efficiency, competition and
capital formation.
Since the 1980s, the Commission has conducted, to the
extent possible, an analysis of the costs and benefits of its
proposed rules. The SEC has further enhanced the economic
analysis of its rulemaking process in recent years. That
process is far more extensive than that of any other federal
financial regulator.
H.R. 78 Would Unnecessarily Impede the SEC from Protecting Investors
The provisions of H.R. 78 create a false and misleading
expectation that the SEC can reasonably measure, combine and
compare the balance of all costs and benefits of its
proposals consistent with its mandate to protect investors.
As explained by Professor Craig M. Lewis, former chief
economist and director of the SEC's Division of Economic and
Risk Analysis: ``[W]ith regard to investor protection, the
Commission is often unable to reasonably quantify the related
benefits or costs.''
H.R. 78, if adopted, would impose upon the SEC a costly,
time consuming and incomplete analysis in which the
Commission would be hard pressed to determine that the
benefits of a proposal or rule ``justify the costs of the
regulation.'' As a result, we believe the provisions of H.R.
78 would unnecessarily impede the ability of the SEC to issue
proposals in furtherance of its mission to protect
investors--the element of its mission that, in our view, is
most critical to maintaining and enhancing a fair and
efficient capital market system consistent with economic
growth.
H.R. 78 Should Be Subject to a Public Hearing
Finally, as indicated, it is not clear to us how the
provisions of H.R. 78 would improve the cost-effectiveness of
SEC rulemaking or benefit long-term investors, the capital
markets or the overall economy. Moreover, we believe it is
unlikely that the House could demonstrate that the benefits
to investors of H.R. 78 justify the costs of implementing the
bill. In that regard, perhaps before the House votes on H.R.
78, the committee of jurisdiction; the House Committee on
Financial Services (including its fourteen new members)
should conduct a public hearing on the bill. The hearing
might include testimony from the SEC, investors, and other
knowledgeable market participants about, among other issues,
the potential costs and benefits of the proposed legislation.
We would respectfully request that you oppose the passage
of H.R. 78.
Thank you for consideration of our views. If we can answer
any questions or provide additional information on this
important matter, please do not hesitate to contact me.
Sincerely,
Jeff Mahoney,
General Counsel.
____
Better Markets
Fact Sheet on H.R. 78, the SEC Regulatory Accountability Act
H.R. 78 amends the Securities Exchange Act of 1934 and
requires the Securities and Exchange Commission (SEC) to
follow burdensome new procedures before it issues any new
rules.
The SEC is the federal agency responsible for protecting
investors and markets by regulating securities professionals
and much of the financial industry, including most of the
activities on Wall Street. H.R. 78 would impose significant
new and onerous requirements on the SEC, which would make it
much more difficult to effectively regulate Wall Street and
protect investors and our markets.
Specifically, H.R. 78 requires the SEC to undertake
extensive cost-benefit analyses of every proposed rule, and
requires the SEC, before even proposing a new regulation, to
first identify every ``available alternative''--an impossible
standard to meet--and to then explain why each of those
alternatives was insufficient. Not only would this bog down
the agency with endless analysis of all possibilities, but it
would also result in endless litigation as industry
participants sue to overturn rules they don't like; industry
would only have to assert that the SEC hadn't considered some
alleged ``available alternative'' for the rule to be thrown
out. This would effectively paralyze the SEC from issuing any
new rules, leaving investors, customers and our markets
unprotected.
Not just new regulations would be impacted; long-
established, decades-old rules that have kept the markets
operating effectively for years would also be in jeopardy.
H.R. 78 requires the SEC to review every regulation on its
books within one year, and repeat the exercise every five
years. Because H.R. 78 does not provide additional funding
for the SEC, it is inevitable that these requirements would
overwhelm the agency, which would have to divert its already
limited resources away from policing Wall Street to endlessly
reviewing rules.
Although H.R. 78 requires the SEC to consider a rule's
impact on the financial industry, there is no such
requirement for the SEC to consider its benefits to the
public. H.R. 78 does not explain why the SEC should weigh a
rule's costs to the industry more than it weighs its benefits
to the American taxpayer.
Importantly, the SEC already does extensive economic
analyses of its rules. Former SEC Chairman Mary Schapiro
testified before Congress that ``The SEC's substantive rule
releases include more extensive economic analysis than those
of any other federal financial regulator.'' Independent
reviews by the Government Accountability Office and the SEC's
Inspector General concluded the SEC's economic analyses were
of a high standard and appropriately ``reflected statutory
requirements to consider certain types of benefits and
costs.''
As noted by the Council of Institutional Investors,
requiring SEC to do cost-benefit analyses like those proposed
in H.R. 78 would ``undermine effective investor safeguards''
and ``paralyze the [SEC's] regulatory activities.'' Former
SEC Chairman Arthur Levitt said these efforts were attempts
by Congress to ``emasculate'' independent agencies like the
SEC ``under the false guise of modernization.'' In an article
entitled ``The Trojan Horse of Cost Benefit Analysis,'' John
Kemp, a market analyst at Reuters, said bills like H.R. 78
``are not really about cost benefit analysis at all. . . .
The standard they seek to enforce would be impossible to
meet.''
115th Congress --January 2017
Mrs. CAROLYN B. MALONEY of New York. Mr. Chairman, I yield 4 minutes
to the distinguished gentleman from Texas (Mr. Al Green), a member of
the Financial Services Committee.
Mr. Al GREEN of Texas. Mr. Chairman, I thank the gentlewoman for
yielding.
I am absolutely amazed this legislation has progressed to this point.
This is not a panacea. This is not legislation that will prevent some
harm being done to mom-and-pops. This is about Wall Street. This is
about multimillion-dollar corporations. It is not unusual here for
those who would benefit from the use of those who live on Main Street,
they would benefit from it by saying that the bill is for Main Street
when in fact it is for Wall Street.
This bill should properly be labeled the bill that the SEC rulings
would come under stagnation, litigation, and decimation as a result of,
because the way the bill is worded, there will be much litigation, and
that litigation will tie the SEC up in court for many years. That will
create the stagnation
[[Page H434]]
which will cause the SEC to be ineffective; and, as a result, the SEC,
in terms of its rulemaking, will be decimated.
Let's talk for a moment about a cost-benefit analysis. That is a very
simple formula that can be used if you want to refinance your home and
you want to get a different interest rate over a different period of
time. All of the numbers associated with it are quantifiable. But if
you want to do cost-benefit analysis in terms of fraud prevention, the
prevention of fraud is not quantifiable; it is not knowable.
Bernie Madoff made off with approximately $64 billion, and in so
doing, he perpetrated one of the biggest frauds ever perpetrated on the
United States of America, the American people. If we had a regulation
in place to prevent that fraud that Bernie Madoff perpetrated, there
would be no way of knowing that he would have perpetrated the $64
billion fraud. You can't quantify legislation that prevents the fraud.
If we had legislation in place to prevent the downturn in 2008, that
would have prevented the 327s, the 228s, the teaser rates that
coincided with prepayment penalties, the no-doc loans. If we had
regulations in place to prevent it, then we would never have known the
harm it would have caused the economy.
That is what this bill will do. It will put the SEC in a position
such that it cannot produce the rules to prevent the fraud that we can
never measure. It is not knowable how much fraud will be prevented by
the rules that the SEC promotes and produces.
This legislation also does not allow the SEC to move at the speed of
innovation. Innovation moves quickly. The SEC has to be able to produce
rules to match the speed of innovation. This is why it was difficult to
do something about what was happening to the economy leading up to
2008. We didn't have the speed necessary, and now we are going to put a
further burden on the SEC such that the SEC won't be able to respond to
these new products that are coming on the market. And make no mistake,
they will come on the market.
The stock market crash of 1929 was something that rules and
regulations could have prevented. They were not there. They put them in
place. Glass-Steagall was one of them. It took 66 years, but they got
Glass-Steagall. I don't know how long it is going to take them, but
they intend to get Dodd-Frank. This is the first step in the direction
of making Dodd-Frank impotent.
Mr. HUIZENGA. Mr. Chairman, at this time I yield 3 minutes to the
gentleman from Illinois (Mr. Hultgren), the vice chairman of the
Capital Markets Subcommittee.
{time} 1500
Mr. HULTGREN. Mr. Chairman, I rise today to speak in support of the
SEC Regulatory Accountability Act. I thank the gentlewoman from
Missouri (Mrs. Wagner) for championing this important legislation.
Those of us who were in Congress last year will remember the
leadership of Scott Garrett in ensuring our financial regulators,
especially the SEC, make use of robust cost-benefit analysis while
imposing rules on businesses and the American people.
That is why this bill was reported from the Financial Services
Committee with bipartisan support in the 114th Congress and has
consistently received votes from both sides of the aisle in the past.
Policymaking can be tough. There are always dozens of pros and cons
that need to be considered. Every good idea, even those with the best
of intentions, likely have minor drawbacks. However, the idea of
ensuring benefits exceed the costs should not be a partisan one. We are
simply saying that our government's policies should do more good than
harm.
You might be surprised to hear that the SEC's Inspector General has
issued a report expressing several concerns about the quality of the
SEC's economic analysis. It found none of the rulemaking it examined
attempted to quantify either benefits or costs other than information
collection costs. However, our job creators and investors know the
scope of the potential cost is far broader than this.
That is exactly what the SEC Regulatory Accountability Act does. It
strengthens the cost-benefit analysis at a key regulator overseeing our
financial markets.
While the SEC has some existing cost-benefit-related policies put
forth by its staff, this bill would strengthen those requirements and
ensure that they are codified so that we can be certain that future
generations benefit from prudent rulemaking.
It would also subject the SEC to Executive Orders 12866 and 13563
issued by Presidents Clinton and Obama.
Oddly enough, some have even made the argument that rules promulgated
by the SEC should not be subject to cost-benefit analysis if they were
mandated by Congress. I don't know where they got this idea, but it is
a chilling reminder that Congress must do more to ensure that the SEC
avoids politically motivated rulemaking that disregards the foundations
of sound policy.
In testimony before the committee last year, Dan Gallagher, a former
Republican SEC Commissioner, noted the CEO pay ratio disclosure rule as
a prime example of agency lawyers taking advantage of loopholes in the
cost-benefit analysis rules and imposing significant burdens on public
companies. This could become a slippery slope if not stopped by
Congress.
We have an opportunity today to protect our capital markets,
investors, and job creators by ensuring that the SEC is doing less harm
than good. I would urge all of my colleagues to vote in favor of sound
policymaking criteria and support Mrs. Wagner's important legislation.
Mrs. CAROLYN B. MALONEY of New York. Mr. Chairman, I yield myself
such time as I may consume.
I would like to share with my colleagues and the American public how
American organizations that work day in and day out to fight to protect
investors, consumers, minorities, workers, and pension plans view this
bill.
The director of investor protection of the Consumer Federation of
America states: ``This legislation goes far beyond what is reasonable
or balanced and, indeed, the bill would exacerbate, rather than end the
most serious shortcomings in the agency's current regulatory process,
its inability to complete rulemaking regarding pressing issues in a
timely manner.''
The general counsel of Council of Institutional Investors stated:
``We believe the provisions of H.R. 78 would unnecessarily impede the
ability of the SEC to issue proposals in furtherance of its mission,
its mission to protect investors.''
Finally, the Americans for Financial Reform stated: ``This
legislation is transparently an effort to paralyze the SEC and to
empower Wall Street lawyers to overturn its decisions and sue and not
to improve its analysis or decisionmaking process.''
I urge my colleagues to heed these warnings and to really hear what
these representatives of the public are saying; and I urge them to vote
``no'' on the underlying bill.
Mr. Chairman, I reserve the balance of my time.
Mr. HUIZENGA. Mr. Chairman, may I inquire as to what is the balance
of the time remaining on each side?
The Acting CHAIR. The gentleman from Michigan has 10\1/4\ minutes
remaining. The gentlewoman from New York has 6\1/2\ minutes remaining.
Mr. HUIZENGA. Mr. Chairman, I yield 2 minutes to the gentleman from
Florida (Mr. Ross).
Mr. ROSS. Mr. Chairman, I thank my good friend from Michigan (Mr.
Huizenga).
I rise today in support of my good friend from Missouri (Mrs.
Wagner's) legislation, H.R. 78, the SEC Regulatory Accountability Act.
The American people have grown tired of unaccountable and unelected
Washington bureaucrats bringing forward burdensome regulations without
fully considering the effect on families in our districts.
This simple and straightforward legislation would enact a statutory
requirement for the SEC to outline enhanced economic analysis
requirements for any new regulations before they can be enacted. It
also requires a review of existing regulations to determine if they are
unduly burdensome or duplicative.
Accountability. The impact of burdensome regulations that lack a
thorough vetting by the SEC can have an
[[Page H435]]
untold effect across our entire economy.
Court cases, Government Accountability Office reports, and the SEC's
own Office of Inspector General have raised important questions and
recommended improvements to various components of the SEC's economic
analysis in its rulemaking.
This legislation would go further by prohibiting the SEC from issuing
a rule when it cannot make a reasoned determination that the benefits
of the intended regulation justify the cost of the regulation. Logic
and reason.
In closing, I support this good-government, commonsense legislation
introduced by Chair Wagner. The SEC Regulatory Accountability Act will
take an important step in preventing the SEC from implementing a
regulation before understanding its full impact on our economy and on
the families in our congressional districts and across the country.
Mrs. CAROLYN B. MALONEY of New York. Mr. Chairman, I yield myself
such time as I may consume.
My Republican colleagues, regrettably, want to impose cost-benefit
analysis that tilts towards industry costs because they know something
that they don't want the American people to know. An impartial cost-
benefit analysis of Wall Street reform rules would inevitably
demonstrate how wildly beneficial such rules are to the U.S. economy
and to the lives of everyday Americans.
Earlier this week, the bipartisan think tank, Third Way, found that
Dodd-Frank's bank capital rules will add $351 billion--as in B,
billion--to the U.S. economy over the next 10 years. This report
presents a cost-benefit analysis that shows that, while lending becomes
slightly more expensive when banks are required to maintain higher
capital levels, the benefits of mitigating another financial crisis
greatly exceed any costs. This report is one of many which Republicans
intentionally ignore.
Reducing the likelihood of another financial crisis does not come
without cost, but the costs are worth it. Let us not forget the
widespread human suffering that has been felt across this Nation
because of the financial crisis. The 2008 financial crisis destroyed
8.7 million American jobs, wiped out $2.8 trillion in retirement
savings of ordinary Americans, and led to the foreclosure, the loss--15
million Americans lost their homes due to financial mismanagement in
this country.
If those aren't significant costs for policymakers to consider, then
what else is?
Mr. Chairman, I reserve the balance of my time.
Mr. HUIZENGA. Mr. Chairman, I yield 1\1/2\ minutes to the gentleman
from California (Mr. Royce), the chairman of the House Foreign Affairs
Committee.
Mr. ROYCE of California. Mr. Chairman, this has been an issue in
Europe. It has been an issue in the United States. I would like to make
the point that, with respect to looking at economic analysis and making
certain that it is bipartisan, I think there is a way to make certain
it is objective.
As I look at the underlying text and then look at the amendment that
we are accepting, we should reflect on this. We are going to have the
SEC here look at both the protection of investors and the effects to
ensure competition and efficiency. So I would explain to the Members
that adding that into what I already thought was pretty exacting rules
here in terms of an objective analysis should really succeed in our
attempt here.
And what is the attempt in this Regulatory Accountability Act?
It is to make sure that the U.S. capital markets are unmatched in
terms of their size, their depth, their resiliency, and transparency.
And this Regulatory Accountability Act gives the Commission the
opportunity to ensure that its rules and regulations, past and present,
each of those are worth pursuing when measured against their economic
costs.
Growing access to capital, protecting investors, preserving the
world's strongest capital markets are not mutually exclusive objectives
here.
The Acting CHAIR. The time of the gentleman has expired.
Mr. HUIZENGA. I yield the gentleman an additional 15 seconds.
Mr. ROYCE of California. And here is what I would like to point out.
The European Union clearly recognizes this conundrum right now. They
are launching a call for evidence to investigate the unintended
consequences created by their regulatory framework because they are
searching for balance in this, too, to make sure that they have
retrospective examination.
It is prudent. Frankly, as the effectiveness of regulation is
measured by outcomes rather than volume in a situation like this, it
drives us toward efficiency in the market.
Mrs. CAROLYN B. MALONEY of New York. Mr. Chairman, I yield myself
such time as I may consume.
I want to point out that with Dodd-Frank and the reforms that the
Democrats put in place, our economy bounded back faster and stronger
than all of Europe. And I must say that one of the areas that we need
to work on, where we are falling behind in our economy, is exports. We
need to support exports.
Despite all the talk that we hear from Republicans about enacting
policies that support jobs and job creation, and the slew of tweets
from the President-elect discouraging American companies from moving
U.S. jobs overseas--and I support his efforts to stop our companies
from going overseas--one proven job creator has remained on the
sidelines, and that is the U.S. Export-Import Bank. This Bank has
played a critical role in opening up international markets to U.S.
exporters, which, in turn, helps create and preserve jobs here in
America.
The export-import banks of our competitors are supported by those
countries five times more than what we do here in America. In fact, the
ability of the Export-Import Bank to even operate, even though it makes
money and has succeeded in building up American exports, has been
hamstrung by the leadership of my good friends and colleagues on the
other side of the aisle.
In recognition of the Bank's success and supporting U.S. jobs over
the past 80 years, in December of 2015 the House and the Senate voted
with overwhelming majorities to reauthorize the Export-Import Bank.
Despite this broad support, the Bank has remained hamstrung because,
with three empty seats on its five-member board, the Bank lacks the
quorum it needs in order to approve transactions over $10 million.
Although President Obama nominated two individuals to serve on the
Ex-Im's bipartisan board, the Senate Republican leadership refused to
consider them, and Ex-Im's board remains without a quorum. They can not
approve these exports. I think it is a national scandal.
Indeed, it has been more than 18 months since the Export-Import
Bank's board was last able to consider transactions, which has limited
its ability to ensure U.S. workers and businesses of all sizes are able
to compete around the world for contracts, as well as support jobs for
the many small businesses that contribute to the supply chains for
these high-value exports.
{time} 1515
In fact, the bank currently has 50 transactions in its pipeline
valued at nearly $40 billion, which, if approved, would support more
than 100,000 American high-skill and high-wage jobs. I intend to bring
this to the attention of the President-elect.
So, as we talk today about how these Republican bills will create
American jobs, I think it is important that we look at the GOP's full
record on job creation or, might I say in this case, job prevention. As
their record shows, Republican leaders have been all too willing to let
U.S. jobs slip away to our foreign competitors.
Until Congress restores Ex-Im to full functionality, U.S. companies
selling expensive capital goods such as aircraft, locomotives, nuclear
reactors, and turbines will remain at a unique competitive disadvantage
because their foreign competitors all enjoy ample financing from their
home-country export credit agencies--enough to easily knock U.S.
companies out of the competition. This is unfair.
We cannot compete and win in the global economy unless we support our
businesses. We will lose global market share in key sectors such as the
satellite industry, aerospace, and telecommunications. We will lose
tens of thousands of jobs as some of the biggest U.S. exports suffer
declining overseas sales, and, eventually, some of
[[Page H436]]
these companies would be forced to move jobs to where export credit is
still available. We have seen this reported in the news daily where
they are moving to our competitors.
So, in short, we need to support the Export-Import Bank. We need to
not hamstring the SEC by requiring it to have unnecessary, time-
consuming, duplicative rules that are already in place and that allow
people to sue them more easily.
Mr. Chairman, I urge my colleagues on both sides of the aisle who
care, as President-elect Trump does, about job creation to be opposed
to this bill.
Mr. Chair, I yield back the balance of my time.
Mr. HUIZENGA. Mr. Chairman, may I inquire as to the balance of the
time remaining?
The Acting CHAIR. The gentleman from Michigan has 7 minutes
remaining. The gentlewoman from New York's time has expired.
Mr. HUIZENGA. Mr. Chairman, at this time, I do not intend to yield to
the gentlewoman from New York, even though I struggle to understand how
the Export-Import Bank had anything to do with what we are talking
about here today.
Mr. Chairman, I yield 2 minutes to the gentleman from Colorado (Mr.
Tipton), a member of the Financial Services Committee.
Mr. TIPTON. Mr. Chairman, the SEC Regulatory Accountability Act
subjects the SEC to enhanced cost-benefit analysis requirements and
requires a review of existing regulations.
By promoting economic analysis requirements during the regulatory
process, this bill ensures that regulation writing is data driven and
not done on an ad hoc basis with little thought to the true impact the
expanding regulatory net has on businesses and the economy.
It is a mistake for regulators overseeing our financial system and
the capital markets, including the SEC, to promulgate regulations
without fully considering the costs and benefits, as well as all of the
available regulatory alternatives.
This bill also takes the commonsense approach of requiring the SEC to
evaluate whether a proposed regulation is inconsistent with, or
duplicative of, other Federal regulations. When our businesses are
being overwhelmed by compliance obligations that demand more and more
time and resources, it is crucial that our regulators do everything in
their power to ensure that regulations are effective, streamlined, and
nonduplicative to minimize impact.
It is important to note that this legislation does not limit the
SEC's rulemaking authority in any capacity. The bill appropriately
strengthens the SEC's existing cost-benefit-related requirements to
ensure that the true impact of regulations can be calculated.
To advocate for the status quo and against this legislation shows a
fundamental misunderstanding of the financial system and the regulatory
process. This legislation is a vote of confidence that, with the
appropriate tools and a data-driven approach, our regulatory agencies
can create a framework of safety and soundness that does not unduly
burden our economy.
I am happy to lend my support to this bill and encourage my
colleagues to support this commonsense measure. I, again, thank the
gentlewoman from Missouri for her efforts on this legislation.
Mr. HUIZENGA. Mr. Chairman, I yield 2 minutes to the gentleman from
Georgia (Mr. Loudermilk).
Mr. LOUDERMILK. Mr. Chairman, I thank the gentleman for yielding.
Mr. Chairman, Americans have heard time and time again over the last
8 years that our economy is in the slowest recovery since World War II.
Why? It is because unelected bureaucrats bypass this body of Congress
and continually push out hundreds of burdensome regulations onto
American families who are struggling just to get by.
The onslaught of regulations by this administration has proven to
kill jobs, shut down businesses, and stifle our economic growth. But
now it is time to make good on our promise to make a brighter future
for Americans and begin to turn this Nation around.
Just as the American people expect us to know what it is in a bill
before we vote on it, it is equally important to know what is in a
regulation.
Most Federal agencies are required to conduct a thorough cost-benefit
analysis of each regulation before finalizing it. But this isn't always
the case for the Securities and Exchange Commission. While the SEC is
subject to some cost-benefit requirements when a new regulation could
have an overbearing impact on our marketplaces, they are exempt from
having to identify alternative policies.
I rise today in support of the SEC Regulatory Accountability Act
because it will require the SEC to follow its own core principle of
disclosure that it, in itself, enforces on the securities industry in
this Nation. This bill would require the SEC to disclose all the costs
and benefits of each proposed regulation to the public.
We must not allow regulatory agencies to be a roadblock to job
creation by failing to consider the impact proposed rules would have on
our securities market. Additionally, this bill requires the SEC to
clearly identify the nature of the issue before establishing a new
regulation.
Mr. Chairman, our economy cannot flourish without healthy capital
markets. We must hold regulatory agencies to strict standards, just as
they do the businesses they regulate across this Nation. This bill
takes meaningful steps toward achieving these goals, and I urge my
colleagues to vote ``yes.''
Mr. HUIZENGA. Mr. Chairman, I yield 1\1/2\ minutes to the gentleman
from North Carolina (Mr. Budd), a new member of the Financial Services
Committee.
Mr. BUDD. Mr. Chairman, the debate over financial regulation is not
just about more versus less. It is also about the idea that financial
liberty and personal liberty are connected, and they have been for most
of history.
This goes back to the Middle Ages, when widespread use of a bill of
exchange--basically, a check--made it much more difficult for
government to wrongly take people's wealth. That development was one of
the first building blocks of limited government.
Now, today, we see a similar principle at work in global capital.
Like the bill of exchange placing gold or silver out of the reach of
government, the connected global economy allows capital to flow away
from harsh regulation. Countries that get it right are the ones that
win.
There are a number of statistics that suggest that we are getting the
short end of the stick in this arena. We are losing our financial
competitiveness. For example, nearly 10 percent of foreign companies
left the New York Stock Exchange this year, almost double the historic
average. Finally, from 2010 to 2016, the United States slipped from 6th
to 11th in the Index of Economic Freedom.
While this problem has a number of causes, the Securities and
Exchange Commission Regulatory Accountability Act will help improve our
economic competitiveness by requiring that the SEC put its regulations
through a strong cost-benefit analysis and review regulations that are
just plain outdated.
I urge a ``yes'' vote.
Mr. HUIZENGA. Mr. Chairman, I yield myself the balance of my time.
I would just like to point out to those watching on TV the earlier
Democrat-sponsored hot air portion of the bill today.
You heard about the Export-Import Bank. You heard about Bernie
Madoff. You heard about the Dodd-Frank Act being the only answer to an
economic crisis that was caused by a housing crisis which, by the way,
the Dodd-Frank Act did nothing about. By the way, on the Bernie Madoff
situation, the SEC ignored a whistleblower for 10 years.
This bill has nothing to do with fraud, and it is not about a trial
of the effectiveness or lack thereof of the SEC today. This is about a
commonsense notion that we ought to actually identify the target that
these rules are trying to hit and then find out if it is the right
target and analyze that.
What you see on the other side of the aisle is the philosophy that
more is better: the more regulation that the SEC has, the more
paperwork, a bigger budget with more employees. We are not sure what
their effectiveness is, and we are not sure what exactly they are
trying to achieve here, but all we can tell you is that more is better.
Damn the costs; it doesn't matter.
That is, obviously, not the intent that we have on this side of the
aisle. We are trying to make sure that the
[[Page H437]]
proper protection of the investors is there. We are trying to make sure
that the three parts of the SEC's mandate, of which one of those is
capital formation and creating a robust atmosphere, are actually
happening.
I urge passage of the bill.
Mr. Chairman, I yield back the balance of my time.
The Acting CHAIR. All time for general debate has expired.
Pursuant to the rule, the bill shall be considered for amendment
under the 5-minute rule and shall be considered as read.
The text of the bill is as follows:
H.R. 78
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``SEC Regulatory
Accountability Act''.
SEC. 2. CONSIDERATION BY THE SECURITIES AND EXCHANGE
COMMISSION OF THE COSTS AND BENEFITS OF ITS
REGULATIONS AND CERTAIN OTHER AGENCY ACTIONS.
Section 23 of the Securities Exchange Act of 1934 (15
U.S.C. 78w) is amended by adding at the end the following:
``(e) Consideration of Costs and Benefits.--
``(1) In general.--Before issuing a regulation under the
securities laws, as defined in section 3(a), the Commission
shall--
``(A) clearly identify the nature and source of the problem
that the proposed regulation is designed to address, as well
as assess the significance of that problem, to enable
assessment of whether any new regulation is warranted;
``(B) utilize the Chief Economist to assess the costs and
benefits, both qualitative and quantitative, of the intended
regulation and propose or adopt a regulation only on a
reasoned determination that the benefits of the intended
regulation justify the costs of the regulation;
``(C) identify and assess available alternatives to the
regulation that were considered, including modification of an
existing regulation, together with an explanation of why the
regulation meets the regulatory objectives more effectively
than the alternatives; and
``(D) ensure that any regulation is accessible, consistent,
written in plain language, and easy to understand and shall
measure, and seek to improve, the actual results of
regulatory requirements.
``(2) Considerations and actions.--
``(A) Required actions.--In deciding whether and how to
regulate, the Commission shall assess the costs and benefits
of available regulatory alternatives, including the
alternative of not regulating, and choose the approach that
maximizes net benefits. Specifically, the Commission shall--
``(i) consistent with the requirements of section 3(f) (15
U.S.C. 78c(f)), section 2(b) of the Securities Act of 1933
(15 U.S.C. 77b(b)), section 202(c) of the Investment Advisers
Act of 1940 (15 U.S.C. 80b-2(c)), and section 2(c) of the
Investment Company Act of 1940 (15 U.S.C. 80a-2(c)), consider
whether the rulemaking will promote efficiency, competition,
and capital formation;
``(ii) evaluate whether, consistent with obtaining
regulatory objectives, the regulation is tailored to impose
the least burden on society, including market participants,
individuals, businesses of differing sizes, and other
entities (including State and local governmental entities),
taking into account, to the extent practicable, the
cumulative costs of regulations; and
``(iii) evaluate whether the regulation is inconsistent,
incompatible, or duplicative of other Federal regulations.
``(B) Additional considerations.--In addition, in making a
reasoned determination of the costs and benefits of a
potential regulation, the Commission shall, to the extent
that each is relevant to the particular proposed regulation,
take into consideration the impact of the regulation on--
``(i) investor choice;
``(ii) market liquidity in the securities markets; and
``(iii) small businesses.
``(3) Explanation and comments.--The Commission shall
explain in its final rule the nature of comments that it
received, including those from the industry or consumer
groups concerning the potential costs or benefits of the
proposed rule or proposed rule change, and shall provide a
response to those comments in its final rule, including an
explanation of any changes that were made in response to
those comments and the reasons that the Commission did not
incorporate those industry group concerns related to the
potential costs or benefits in the final rule.
``(4) Review of existing regulations.--Not later than 1
year after the date of enactment of the SEC Regulatory
Accountability Act, and every 5 years thereafter, the
Commission shall review its regulations to determine whether
any such regulations are outmoded, ineffective, insufficient,
or excessively burdensome, and shall modify, streamline,
expand, or repeal them in accordance with such review. In
reviewing any regulation (including, notwithstanding
paragraph (6), a regulation issued in accordance with formal
rulemaking provisions) that subjects issuers with a public
float of $250,000,000 or less to the attestation and
reporting requirements of section 404(b) of the Sarbanes-
Oxley Act of 2002 (15 U.S.C. 7262(b)), the Commission shall
specifically take into account the large burden of such
regulation when compared to the benefit of such regulation.
``(5) Post-adoption impact assessment.--
``(A) In general.--Whenever the Commission adopts or amends
a regulation designated as a `major rule' within the meaning
of section 804(2) of title 5, United States Code, it shall
state, in its adopting release, the following:
``(i) The purposes and intended consequences of the
regulation.
``(ii) Appropriate post-implementation quantitative and
qualitative metrics to measure the economic impact of the
regulation and to measure the extent to which the regulation
has accomplished the stated purposes.
``(iii) The assessment plan that will be used, consistent
with the requirements of subparagraph (B) and under the
supervision of the Chief Economist of the Commission, to
assess whether the regulation has achieved the stated
purposes.
``(iv) Any unintended or negative consequences that the
Commission foresees may result from the regulation.
``(B) Requirements of assessment plan and report.--
``(i) Requirements of plan.--The assessment plan required
under this paragraph shall consider the costs, benefits, and
intended and unintended consequences of the regulation. The
plan shall specify the data to be collected, the methods for
collection and analysis of the data and a date for completion
of the assessment. The assessment plan shall include an
analysis of any jobs added or lost as a result of the
regulation, differentiating between public and private sector
jobs.
``(ii) Submission and publication of report.--The Chief
Economist shall submit the completed assessment report to the
Commission no later than 2 years after the publication of the
adopting release, unless the Commission, at the request of
the Chief Economist, has published at least 90 days before
such date a notice in the Federal Register extending the date
and providing specific reasons why an extension is necessary.
Within 7 days after submission to the Commission of the final
assessment report, it shall be published in the Federal
Register for notice and comment. Any material modification of
the plan, as necessary to assess unforeseen aspects or
consequences of the regulation, shall be promptly published
in the Federal Register for notice and comment.
``(iii) Data collection not subject to notice and comment
requirements.--If the Commission has published its assessment
plan for notice and comment, specifying the data to be
collected and method of collection, at least 30 days prior to
adoption of a final regulation or amendment, such collection
of data shall not be subject to the notice and comment
requirements in section 3506(c) of title 44, United States
Code (commonly referred to as the Paperwork Reduction Act).
Any material modifications of the plan that require
collection of data not previously published for notice and
comment shall also be exempt from such requirements if the
Commission has published notice for comment in the Federal
Register of the additional data to be collected, at least 30
days prior to initiation of data collection.
``(iv) Final action.--Not later than 180 days after
publication of the assessment report in the Federal Register,
the Commission shall issue for notice and comment a proposal
to amend or rescind the regulation, or publish a notice that
the Commission has determined that no action will be taken on
the regulation. Such a notice will be deemed a final agency
action.
``(6) Covered regulations and other agency actions.--Solely
as used in this subsection, the term `regulation'--
``(A) means an agency statement of general applicability
and future effect that is designed to implement, interpret,
or prescribe law or policy or to describe the procedure or
practice requirements of an agency, including rules, orders
of general applicability, interpretive releases, and other
statements of general applicability that the agency intends
to have the force and effect of law; and
``(B) does not include--
``(i) a regulation issued in accordance with the formal
rulemaking provisions of section 556 or 557 of title 5,
United States Code;
``(ii) a regulation that is limited to agency organization,
management, or personnel matters;
``(iii) a regulation promulgated pursuant to statutory
authority that expressly prohibits compliance with this
provision; and
``(iv) a regulation that is certified by the agency to be
an emergency action, if such certification is published in
the Federal Register.''.
SEC. 3. SENSE OF CONGRESS RELATING TO OTHER REGULATORY
ENTITIES.
It is the sense of the Congress that the Public Company
Accounting Oversight Board should also follow the
requirements of section 23(e) of such Act, as added by this
title.
SEC. 4. ACCOUNTABILITY PROVISION RELATING TO OTHER REGULATORY
ENTITIES.
A rule adopted by the Municipal Securities Rulemaking Board
or any national securities association registered under
section 15A of the Securities Exchange Act of 1934 (15 U.S.C.
78o-3) shall not take effect unless the Securities and
Exchange Commission determines that, in adopting such rule,
the Board
[[Page H438]]
or association has complied with the requirements of section
23(e) of such Act, as added by section 2, in the same manner
as is required by the Commission under such section 23(e).
The Acting CHAIR. No amendment to the bill shall be in order except
those printed in part A of House Report 115-3. Each such amendment may
be offered only in the order printed in the report, by a Member
designated in the report, shall be considered read, shall be debatable
for the time specified in the report, equally divided and controlled by
the proponent and an opponent, shall not be subject to amendment, and
shall not be subject to a demand for division of the question.
Amendment No. 1 Offered by Mr. Al Green of Texas
The Acting CHAIR. It is now in order to consider amendment No. 1
printed in part A of House Report 115-3.
Mr. AL GREEN of Texas. Mr. Chairman, I have an amendment at the desk
as the designee of the gentlewoman from California (Ms. Maxine Waters).
The Acting CHAIR. The Clerk will designate the amendment.
The text of the amendment is as follows:
Page 3, line 3, strike ``and''.
Page 3, line 8, strike the period and insert ``; and''.
Page 3, after line 8, insert the following:
``(E) in consultation with the Office of Ethics Counsel of
the Commission, identify any former nongovernmental employer
of a Commissioner, Director, Deputy Director, Associate
Director, or Assistant Director that would receive direct or
indirect benefit from a rule or regulation, analyze the
benefits to such employer, and whether the regulation should
be amended to address any potential conflict of interest or
appearance of a conflict of interest.''.
Page 6, after line 5, insert the following:
``(5) Conflicts of interest.--The Commission shall identify
the employers of any Commissioners, Directors, Deputy
Directors, Associate Directors, and Assistant Directors who
have left the Commission within five years of the scheduled
adoption of the final rule, and whether such employers
receive direct or indirect benefits, and whether the
Commission should amend the rule to address the identified
conflict of interest.''.
Page 7, line 19, insert after the period the following:
``The assessment plan shall also include an analysis of
whether and how any former nongovernmental employer of a
Commissioner, Director, Deputy Director, Associate Director,
or Assistant Director, or the current employer of a former
Commissioner, Director, Deputy Director, Associate Director,
or Assistant Director who departed the Commission within five
years of the scheduled adoption of the regulation, directly
and indirectly benefits from the regulation, and a
recommendation as to whether such regulation should be
amended to address the identified conflict of interest.''.
The Acting CHAIR. Pursuant to House Resolution 40, the gentleman from
Texas (Mr. Al Green) and a Member opposed each will control 5 minutes.
The Chair recognizes the gentleman from Texas.
Mr. AL GREEN of Texas. Mr. Chairman, I think it appropriate to point
out what the style of this bill is, what the words on the actual bill
say. There seems to be some confusion with my colleagues on the other
side as to whether or not this is a mom-and-pop bill.
The bill itself says, ``A bill to improve the consideration by the
Securities and Exchange Commission of the cost and benefits of its
regulations and orders.''
The Securities and Exchange Commission deals with Wall Street, deals
with megabusinesses. This is not about a mom-and-pop store. This is not
about the small business in the neighborhood. This is about
megabusinesses desiring to have access to markets without the
regulations necessary to protect investors.
This bill, if it passes, will place the SEC in a mission impossible
position because it will be impossible for the SEC to do what it needs
to do to promote regulations that will prevent fraud. Either litigation
will stop them or they won't be able to define and quantify the
benefits associated with regulation that can prevent fraud.
A good example has been presented, but some things bear repeating. If
we had produced regulations that would have prevented Bernie Madoff
from robbing the country of $64 billion, we wouldn't have known it, we
couldn't quantify it, because it wasn't knowable.
This bill puts the SEC in a position of having to do that which is
not knowable because it would prevent fraud.
{time} 1530
Now, having said this, the Waters amendment will at least allow us to
curtail some of the conflicts of interest that can take place by
persons who will come from some entity that works with persons on Wall
Street or when they leave, go to an entity that works with Wall Street.
Our regulators ought not be able to take their rules and regulations to
companies and businesses that will impact Wall Street after they leave
or impact their businesses once they are on Wall Street.
This amendment that the Honorable Maxine Waters has presented would
cause the SEC to identify, analyze, and address potential conflicts of
interest in its proposed rules, and it would go on to make sure that
persons who work for the SEC do not create conflicts of interest.
We live in a world where it is not enough for things to be right;
they must also look right. It doesn't look right for these Wall Street
types, the persons from Goldman Sachs and related industries who will
come to Wall Street, take jobs, and promote rules that benefit their
former employers, nor does it look right for them to produce rules that
will benefit employers that they will go to when they leave Wall
Street.
That is what this amendment will prevent. It is simple. It is not
complicated, and it deals with conflicts of interest. I think this
amendment ought to be supported.
Mr. Chairman, I reserve the balance of my time.
Mr. HUIZENGA. Mr. Chairman, I claim the time in opposition to this
amendment.
The Acting CHAIR (Mr. Palmer). The gentleman from Michigan is
recognized for 5 minutes.
Mr. HUIZENGA. Mr. Chairman, I feel compelled to point out to my
colleagues that we are not paid by the word that is put into the
Federal Register. I think, once again, you are hearing this example of
more is better. It doesn't matter what the words say, just let's have
more of them.
We already have the SEC Chairman and the Commissioners covered by
both governmentwide ethics laws and regulations as well as SEC
supplemental ethics regulations which apply to all SEC employees. For
example, they cannot participate personally and substantially in any
matter that would have direct or predictable effect on his or her
financial interests or imputed financial interests in the future, as
required under the code.
Also, unless they are specifically authorized by the SEC's ethics
counsel, they should recuse from any matter in which he or she has a
``covered relationship.'' Well, what is a covered relationship? Well, a
covered relationship includes former employees, clients, and even a
spouse's employer. Further, the SEC employees must report their
financial holdings to the SEC's ethics counsel; and this requirement
goes beyond, frankly, the governmentwide reporting requirement.
Finally, the SEC Chairman or a Commissioner must not engage in any
other business, employment, or vocation while in office; nor may he or
she ever use the power of their office to influence their name to
promote the business interests of others, as required by law.
As such, I ask my colleagues to join me in opposing this amendment.
Mr. Chairman, I reserve the balance of my time.
Mr. AL GREEN of Texas. Mr. Chairman, how much time do I have
remaining?
The Acting CHAIR. The gentleman from Texas has 1 minute remaining.
Mr. AL GREEN of Texas. Mr. Chairman, let me say this in my 1 minute.
It appears that the other side believes that nothing is better because
that is what this bill would cause the SEC to produce--nothing. It
would stagnate the SEC. It would place the SEC in litigation. It would
literally decimate the SEC because you cannot quantify bills or
regulations that will prevent fraud. You can't quantify it. I have
given you the example.
I know the public is listening. You need to weigh in on this, members
of the public, because this is not about mom-and-pops. It is about
megacorporations. This piece of legislation that Ms. Waters offers at
least
[[Page H439]]
will deal with conflicts of interest beyond the person who happens to
work with the SEC, which is what has been addressed. It will deal with
conflicts of interest as they relate to the businesses that they will
go to or the businesses that they have left.
Mr. Chairman, I yield back the balance of my time.
Mr. HUIZENGA. Mr. Chairman, I will wrap up here by simply saying that
the bill before us today is intending to clarify--or have the SEC, I
should say, clarify what the goal and objective is of their proposed
rule. Let's find out what they are trying to do, and then, more
importantly, find out if it is actually effective.
There might be a rule in place already somewhere else. The other side
is trying to strike that provision. They are trying to say: No. No. It
doesn't matter what the other hand of government is saying. We are
going to just add more and more regulation added on.
We need to have a clear understanding of what the objective is, what
the target is, and whether it is an effective rule to get to that
point. I just would encourage my colleagues to oppose the Waters-Green
amendment.
Mr. Chairman, I yield back the balance of my time.
The Acting CHAIR. The question is on the amendment offered by the
gentleman from Texas (Mr. Al Green).
The question was taken; and the Acting Chair announced that the noes
appeared to have it.
Mr. AL GREEN of Texas. Mr. Chairman, I demand a recorded vote.
The Acting CHAIR. Pursuant to clause 6 of rule XVIII, further
proceedings on the amendment offered by the gentleman from Texas will
be postponed.
Amendment No. 2 Offered by Ms. Velazquez
The Acting CHAIR. It is now in order to consider amendment No. 2
printed in part A of House Report 115-3.
Ms. VELAZQUEZ. Mr. Chairman, I have an amendment at the desk.
The Acting CHAIR. The Clerk will designate the amendment.
The text of the amendment is as follows:
Page 4, line 1, insert after ``making'' the following: ``,
in addition to being in the interest of protecting
investors,''.
Page 5, line 21, insert after the period the following:
``Whenever pursuant to this paragraph the Commission is
engaged in a review, it shall consider whether an action is
necessary or appropriate in the public interest, the
protection of investors, and whether the action will promote
efficiency, competition, and capital formation.''.
The Acting CHAIR. Pursuant to House Resolution 40, the gentlewoman
from New York (Ms. Velazquez) and a Member opposed each will control 5
minutes.
The Chair recognizes the gentlewoman from New York.
Ms. VELAZQUEZ. Mr. Chairman, I yield myself such time as I may
consume.
Mr. Chairman, my amendment is simple and straightforward. It will
help ensure the SEC fulfills one of its core mission functions--
protecting investors.
As Members of Congress, we must never forget the lessons of the
financial crisis and the Great Recession. Americans lost $14 trillion,
suffering sharp declines in retirement savings, pension funds, and
overall wealth. This was due, in part, to being pushed into abstract
and sophisticated financial products and securities that they knew
little or nothing about.
I was here in 2008, Mr. Chairman. I listened to the people. I heard
their stories. Unfortunately, for many of them, the financial crisis
and the Great Recession caused deep and lasting harm. Many may never
recover.
I proudly supported the Dodd-Frank Act and believe the SEC has
implemented many regulations that will guard against another financial
crisis and help preserve the financial future of American families for
generations to come. For these reasons, I am concerned the regulatory
reviews required by the underlying bill do not properly account for
investor protection.
To that end, my amendment ensures the SEC does more than just
consider how a proposed regulation will impact businesses. It expressly
instructs the SEC to weigh the safeguards of investors when changing a
rule or regulation. My amendment instructs the SEC to continue focusing
on investor protection not only when drafting new rules but also when
reviewing existing regulations. Let me be clear: it is vitally
important that this language be included to ensure investors' needs do
not take a backseat to industry concerns.
We must never go back to the days leading up to the crisis, Mr.
Chairman. By simply instructing the SEC to take into account investor
protections when reviewing and considering new or existing regulations,
my amendment helps ensure the safeguards we put in place under the
Dodd-Frank Act are preserved. This will mean retirement savings and
household wealth are more secure, and we are not once again risking
deep and lasting harm to our economy and financial markets. For these
reasons, I urge the adoption of my amendment.
Mr. Chairman, I reserve the balance of my time.
Mr. HUIZENGA. Mr. Chairman, I ask unanimous consent to claim the time
in opposition to this amendment, though I am not opposed.
The Acting CHAIR. Is there objection to the request of the gentleman
from Michigan?
There was no objection.
The Acting CHAIR. The gentleman from Michigan is recognized for 5
minutes.
Mr. HUIZENGA. Mr. Chairman, I am prepared to accept the amendment and
support its immediate passage. I want to thank the sponsor for working
with us to draft the language that is consistent with the SEC's
tripartite mission to: number one, protect investors; number two,
maintain fair, orderly, and efficient markets; and, number three,
facilitate capital formation.
I would like to ask my colleagues to join me in supporting the
amendment and the underlying bill.
Mr. Chairman, I reserve the balance of my time.
Ms. VELAZQUEZ. Mr. Chairman, I yield myself such time as I may
consume.
I want to thank the gentleman and Chairman Hensarling for working
with me on this important amendment. I urge Members to vote ``yes,''
which is a vote to protect average, ordinary American investors.
Mr. Chairman, I yield back the balance of my time.
Mr. HUIZENGA. Mr. Chairman, I yield back the balance of my time.
The Acting CHAIR. The question is on the amendment offered by the
gentlewoman from New York (Ms. Velazquez).
The amendment was agreed to.
Amendment No. 3 Offered by Mr. Al Green of Texas
The Acting CHAIR. It is now in order to consider amendment No. 3
printed in part A of House Report 115-3.
Mr. AL GREEN of Texas. Mr. Chair, I have an amendment at the desk.
The Acting CHAIR. The Clerk will designate the amendment.
The text of the amendment is as follows:
Page 10, line 16, strike ``and''.
Page 10, line 20, strike the first period and all that
follows and insert ``; and''.
Page 10, after line 20, insert the following:
``(iv) a regulation promulgated to maintain or support U.S.
financial stability or prevent or reduce systemic risk.''.
The Acting CHAIR. Pursuant to House Resolution 40, the gentleman from
Texas (Mr. Al Green) and a Member opposed each will control 5 minutes.
The Chair recognizes the gentleman from Texas.
Mr. AL GREEN of Texas. Mr. Chair, this amendment would exclude from
this bill regulations that would promote financial stability and
prevent or reduce systemic risk. I have indicated previously that we
are concerned about the bill's unintended consequence--I don't think
that my colleagues are doing this with malice aforethought--the
unintended consequence of stagnating the SEC to the point that it
cannot produce regulations that will prevent fraud. Nowhere in the bill
does it exempt regulation that will prevent fraud.
I believe that this will help us because the bill needs to allow the
SEC the ability to move at the speed of innovation. These products are
coming on the market. The best way for the SEC to be able to react to
them efficaciously would be for the SEC to have rulemaking authority at
the same speed of the innovation.
I hope that we won't allow the SEC to be bogged down with a cost-
benefit
[[Page H440]]
analysis that is impossible to produce and that, when produced, will
produce litigation. Again, I think this is a reasoned, thoughtful
amendment. I trust that it will be adopted.
Mr. Chair, I reserve the balance of my time
Mr. HUIZENGA. Mr. Chairman, I claim the time in opposition to this
amendment.
The Acting CHAIR. The gentleman from Michigan is recognized for 5
minutes.
Mr. HUIZENGA. Mr. Chairman, I just find it a bit ironic that the
other side is not interested in doing this cost-benefit analysis which
is in the underlying bill here because it is too burdensome. But what
do they want to do? They want to add more paperwork and more burden in
their amendments.
Despite what you have heard, the SEC is not a systemic risk
regulator; and even the former chairman of the Committee on Financial
Services, Barney Frank, noted at the time when the FSOC was reviewing
asset managers for systemic designations, he recognized that these are
not entities that pose a systemic risk to the financial system. And
while the SEC does not regulate systemic risk, I am afraid that this
amendment could be potentially politically misinterpreted and applied
to a number of capital market participants and activities which they,
frankly, have no business regulating. So it would lead to the same
fire, aim, ready kind of situation rulemaking that we have seen from
the current administration that hinders growth and that capital market
formation that we have just talked about in the last amendment.
The bill before us will ensure that future SEC rulemakings are
prudently proposed and adopted to achieve the maximum net benefit, and
that is what we are really talking about here today. While I support
the underlying bill, I will have to oppose this amendment.
Mr. Chairman, I reserve the balance of my time.
{time} 1545
Mr. AL GREEN of Texas. Mr. Chairman, I would remind my friend across
the aisle that the Volcker rule does deal with systemic risk. I would
remind him that the SEC does play a role in regulating systemic risk.
Having said that, let's just talk again. And I would engage in a
colloquy with you and use my time. Explain to me how you would quantify
a regulation designed to prevent fraud such as the fraud perpetrated by
Madoff.
How would you quantify it in dollars and cents? Because that is what
you are all about, dollars and cents. How do you quantify that?
Mr. HUIZENGA. Will the gentleman yield?
Mr. AL GREEN of Texas. I yield to the gentleman from Michigan.
Mr. HUIZENGA. This has nothing to do with Bernie Madoff since the
whistleblower approached the SEC and the SEC, using its dollars, was
not able to stop him.
Mr. AL GREEN of Texas. Reclaiming my time, Mr. Chairman, it does have
to do--you are trying to divert us from the actual problem, which is
regulations that can prevent fraud.
How do you propose to quantify in dollars and cents regulations that
will prevent fraud when the fraud that can be perpetrated is not
knowable?
I yield to the gentleman from Michigan.
Mr. HUIZENGA. I appreciate the gentleman yielding. Working together
on the Financial Services Committee, we know that there are actuarial
tables and analyze risk all the time. You are able to analyze fraud.
Mr. AL GREEN of Texas. Reclaiming my time, there is no way for anyone
to have known.
Mr. HUIZENGA. You are able to analyze that risk.
Mr. AL GREEN of Texas. I reclaim my time. There is no way for anyone
to have known what Bernie Madoff was going to do. It was not knowable.
You are imposing a mission impossible upon the SEC.
There is a real question that has to be answered today, Mr. Chair, or
at some point in the future: Does Congress regulate Wall Street or does
Wall Street regulate Congress?
Now, this is a serious question because that is what this kind of
regulation gives us the image of being a part of.
Wall Street wants this. This benefits Wall Street. It doesn't benefit
mom and pops. It doesn't benefit Main Street. It benefits
megacorporations. And you can couch the language in any clever way that
you want.
In the final analysis, this is all about megacorporations being able
to do things that would prevent--that would not be in the best interest
of investors. Investors who are listening to this. You ought to be
concerned. This impacts you. If this legislation passes, your
opportunity to participate in Wall Street with regulations that are
going to prevent fraud from being perpetrated upon you--similar to what
Madoff perpetrated--will not be possible.
Mr. Chairman, I reserve the balance of my time.
The Acting CHAIR. Members are reminded to address their remarks to
the Chair.
The gentleman from Michigan is recognized.
Mr. HUIZENGA. Mr. Chairman, may I inquire as to the remaining balance
of the time.
The Acting CHAIR. The gentleman from Michigan has 3\1/2\ minutes
remaining, and the gentleman from Texas has 30 seconds remaining.
Mr. HUIZENGA. At this point I am ready to close and I reserve the
balance of my time.
Mr. AL GREEN of Texas. Mr. Chairman, in closing, let me simply say
this: People who are viewing this at home should become very much
concerned about the direction that we are headed in. This is a new
Congress and here we are currently trying to emasculate the SEC by
putting it in a position such that it cannot produce rules to
protecting investors; by requiring it to know the unknowable; to know
that a rule that you are putting in place to prevent fraud has a
quantifiable dollar amount that you can produce so that you can measure
that against the cost of producing the rule.
Mr. Chairman, this amendment that I propose would benefit the SEC and
investors.
Mr. Chair, I yield back the balance of my time.
Mr. HUIZENGA. Mr. Chairman, I would just like to point out to all of
my colleagues and to the American people that currently the SEC is
under a court order to clarify how exactly they are doing their
rulemaking. And there is a staff-level rule letter.
With this underlying bill, we are trying to codify that. We are
trying to make sure, not just with a letter, but by law, that they do
what they are being ordered to do. And I will remind all of my
colleagues and those of you out watching us, the Securities and
Exchange Commission has a mission that has three parts.
The first part is to protect investors. Nothing in this bill weakens
there. Nothing in this bill takes anything away from that. We, in fact,
underscore that.
The second mission that it has is to maintain fair, orderly, and
efficient markets. Emphasis again, fair, orderly, and efficient
markets. What we are seeing is inefficiency that is being built into
the marketplace right now, and we are here to clarify that. Let's find
out, as the SEC is preparing a rule, what the goal and objective is and
what is going to be the impact on it. Yes, cost is part of that, and we
are able to look at that.
The third thing the SEC intended to do is to facilitate capital
formation.
Why is that important and what exactly does that mean?
It means making sure that there is enough money around so that
companies, big, medium, and small, are able to go in there and get the
cash and the credit that they need to go and expand and do the job that
they are trying to do, which is, by the way, employ all of us in
America.
We have talked a lot about the underlying bill and not so much about
the particular amendment that we have before us, but I do continue to
oppose the amendment and encourage the passage of the underlying bill.
Mr. Chair, I yield back the balance of my time.
The Acting CHAIR. The question is on the amendment offered by the
gentleman from Texas (Mr. Al Green).
The question was taken; and the Acting Chair announced that the noes
appeared to have it.
[[Page H441]]
Mr. AL GREEN of Texas. Mr. Chair, I demand a recorded vote.
The Acting CHAIR. Pursuant to clause 6 of rule XVIII, further
proceedings on the amendment offered by the gentleman from Texas will
be postponed.
The Acting CHAIR. The Committee will rise informally.
The Speaker pro tempore (Mrs. Walorski) assumed the chair.
____________________