A divided U.S. House of Representatives on Friday passed a Republican-sponsored bill that would force federal securities regulators to conduct more economic analysis before adopting rules for Wall Street.
The bill, which is not expected to make it to the Democrat-controlled U.S. Senate floor for a vote, passed largely along party lines in a 235-161 vote.
Republicans backed the measure as reducing red tape for business. Most Democrats opposed it, saying it would hinder the Securities and Exchange Commission from completing rule-writing required by the 2010 Dodd-Frank Wall Street reform law.
“At a time when new regulation after new regulation is being proposed by the Obama Administration, it is critical that we restore some semblance of order to the regulatory process and ensure that our nation’s small businesses do not continue to drown in a sea of red tape,” said New Jersey Republican Scott Garrett, the author of the bill, in remarks on the floor before the vote.
“This is a common sense, pragmatic approach to our rulemaking process that should have been in place all along.”
The bill garnered a lot of attention this week after President Barack Obama issued a statement opposing the measure and SEC Chair Mary Jo White warned it would “create uncertainty” for the market and put the agency at risk of facing constant legal challenges.
U.S. law already requires the SEC to consider the impact regulations would have on competition, efficiency and capital formation. This bill would also call for more due diligence in studying rules before they are adopted, and require the agency to conduct follow-up studies to make sure rules are having the intended effect.
Also, the SEC would need to review all existing regulations every five years to determine whether they are out of date.
House Republicans successfully added an amendment to the bill that would require other rulemaking bodies under the SEC’s supervision, such as the Public Company Accounting Oversight Board and the Financial Industry Regulatory Authority, to abide by the same cost-benefit requirements as the SEC.
The provisions in the bill are “consistent with the Republican efforts to bog down regulations in an effort to protect Wall Street,” said House Financial Services Ranking Member Maxine Waters, in an interview with Reuters after the bill’s passage.
“We think it is foolhardy,” she said, adding that she is grateful to “have the Senate there to help protect” against making the bill law.
Republicans and industry groups have been using the issue of cost-benefit analysis to defeat or slow rules they oppose.
In recent years, trade associations and business groups have convinced federal courts to overturn SEC rules by arguing the agency had failed to properly weigh costs and benefits.
In 2011, the U.S. Chamber of Commerce and Business Roundtable won a legal bid to overturn a rule stemming from the 2010 Dodd-Frank Wall Street reform law that made it easier for shareholders to nominate directors to corporate boards.
House passage of the latest bill comes as the SEC has been battling business groups in court over two more Dodd-Frank rules.
Oral arguments in the challenge of one rule that would force oil, gas and mining companies to disclose their payments to foreign governments are tentatively slated for June 7.
The SEC last year sought to bullet-proof its rules by beefing up its economic analysis. It drafted new guidance calling for its staff to rely more heavily on economists and to provide stronger justifications for its rules.
Since then, there has been a notable change in tone at the SEC, both in the pace of rulemaking and also in the attention it has paid to analyzing the impacts of its rules.
In 2011, the Obama administration issued an executive order calling on federal independent agencies to periodically review regulations to ensure they are not outdated or burdensome.
Republicans on Friday said they were hard-pressed to understand why the Obama administration was opposing the cost-benefit bill, saying it was meant to codify into law both the executive order and prior promises the SEC had made to Congress to beef up its economic analysis.
“The complaints from the other side of the aisle seem absolutely bizarre,” said North Carolina Republican Patrick McHenry.
Every Republican in the House voted to pass the bill on Friday, while 17 Democrats voted for the bill.
Waters said the Democrats who did not vote along party lines were either moderate “blue dogs” or newer members who are still “uneasy, uncertain in their districts and trying to find their feet.”
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