How Not to Muck Everything Up

Both of those landmark legislative achievements of Obama’s first two years in office left many of the most important decisions to regulators rather than inscribing them in law. The Wall Street bill, for instance, has more than 30 studies in it, and does not proscribe things like the precise level of capital a bank has to hold, or the precise way the Volcker rule is implemented, or what is to be done with the ratings agencies. It leaves those questions to regulators. Both bills require the construction of new institutions, such as the Consumer Financial Protection Bureau and the state health-insurance exchanges. And both bills ask existing agencies, like the Federal Reserve and the Center for Medicare and Medicaid Services, to take on much larger roles.

All this tends to play poorly politically, with naysayers worrying about unelected bureaucrats making important decisions behind closed doors. But in some ways, the greater danger is that the doors will not be closed enough. As Eric Patashnik argues in his book Reforms at Risk, recent reforms to open the regulatory process have mainly benefited lobbyists and special interests, as the people who show up and know what to do during the third phase of public comment for a regulatory act that most people will never know happened are the people who are paid to show up and trained to know what to do.

Thus, the implementation period brings a dangerous asymmetry: The public quiets down, as they think action has been taken, but the lobbyists mount up. As Binyamin Appelbaum reported in The New York Times, some industry groups made the decision to focus their energies on this phase even before the bills had passed. “When the Consumer Bankers Association convened its annual meeting in early June,” he wrote, “there was still plenty of time to lobby Congress. But the group’s president, Richard Hunt, told his board that the group should shift its focus to the rule-making process. The board voted to increase the group’s budget and staff.”