On the Eve of Trump’s Deregulatory Revolution - Steven Robert Howard*
Monday, December 19th, 2016 @ 10:18PM
Left: Charging Bull (Bronze), by Arturo Di Monica, in Bowling Green Park in the Financial District in Manhattan, New York City —
President-Elect Trump has the unprecedented opportunity to eliminate thousands of useless federal regulations without any Congressional involvement. Trump is uniquely not beholden to a political party, patrons, pollsters, pundits, lobbyists or ideologues. His Cabinet and federal agency appointees can use the Administrative Procedure Act to rescind eighty years of outdated, useless and, in some cases, stifling regulations that have impeded business and stunted the growth of the US economy. Mr. Trump, not Congress, should appoint “a Special Advisor to the President for Deregulation” who would work out of the White House with all Cabinet members and agency heads to implement the Deregulatory Revolution.
In 1762 Jean-Jacques Rousseau wrote the immortal words that launched the Age of Revolution throughout Europe and America (somewhat contemporized): “Man is born free and everywhere he is in the chains of excessive regulation!”
Right now, before the beginning of the Trump Presidential Administration on January 20, 2017, we are on the eve of a deregulatory revolution that will be unprecedented in American history. Not since the birth of the Modern Administrative State in the 1930s under FDR’s Administration, has there been a President who has the desire and the political clout to significantly reduce the excessive regulations that the federal bureaucracy has spawned and thrived on for eighty years.
President–elect Trump is not beholden to any political party, patron, constituency, lobbying group or ideology. Both houses of Congress are controlled by the Republican Party, so his Cabinet appointments are likely to be readily confirmed. With his Cabinet members installed comes their authority under the Administrative Procedure Act (the “APA”) to significantly reduce federal regulation without any Congressional or judicial review.
More than ninety percent of business regulations in the U.S. are promulgated and adopted in accordance with public notice and agency review procedures set forth in the APA. Those business regulations are not enacted by the U.S. Congress.
Take the Dodd-Frank Act, for instance. In 2010, in the wake of the Great Recession, Congress hastily enacted a skeletal framework of loosely defined concepts. In so doing, it massively delegated to the federal administrative agencies, like the SEC, CFTC, FINRA and the Comptroller of the Currency, vast authority to promulgate and adopt hundreds of regulations to put skin on the bones of their emaciated skeleton. So while the Dodd-Frank Act cannot be repealed without an act of the U.S. Congress, it is not necessary to enact a Dodd-Frank repeal to gut the statute. All of the vast regulations that are essential for its legal authority can be rescinded by each federal administrative agency in a 60 to 90 day APA process without any Congressional action. Including, the so-called Volcker Rule, which seeks to prohibit proprietary trading by U.S. banks and has been vehemently opposed by most money-center banks in the U.S.
The SEC is at the core of business regulation in the U.S. The SEC Chair, Mary Jo White, has tendered her resignation that will allow President Trump to fill three SEC Commissioner vacancies, which constitute a majority of the SEC Commissioners. Once a Trump majority of SEC Commissioners is installed, the SEC under the APA has the legal authority to rescind hundreds of rules that it adopted in the wake of the Great Recession without any Congressional review, subject to a perfunctory 60 to 90-day notice and comment process. Before the November election, the general expectation in the US securities industry was that the SEC would enact a new and vigorous fiduciary standard for broker-dealers throughout the US, similar to but more strenuous than the new fiduciary rule adopted by the Department of Labor last April. Now, it is hard to imagine that there will be any new significant securities regulations at all for at least the next four years, let alone a new fiduciary standard for broker-dealers.
Unlike the SEC which has a governing Commission, the Department of Labor (the “DOL”) does not have a board or commission. Regulatory power and authority are delegated to and centralized in the office of the Secretary of Labor, a Cabinet-level appointment. As a consequence, the DOL Secretary has enormous authority with regard to pension assets and minimum wage standards. President-elect Trump has recently selected a national food chain executive who has publicly stated his vehement opposition to President Obama’s increase in minimum wages and overtime wages. The Obama wage increases are expected to be rescinded in January 2017 without any Congressional oversight or involvement. That executive has stated privately that he opposes the DOL’s newly adopted fiduciary standard for broker-dealers who manage or administer pension assets. It is widely expected that the new DOL fiduciary standard will be rescinded prior to its effectiveness date of April 10, 2017. Thus, the power of the APA in the hands of agency heads whose mission is to dramatically downsize the Modern Administrative State. The US Supreme Court recently strengthened the DOL’s power and authority in its landmark (but little noticed) case in Secretary of Labor Perez v. Mortgage Bankers Association, 135 S.Ct. 1199 (2015), which in effect allows the DOL (or any other federal administrative agency) to reverse its rules without going through a public notice and comment process, and also shields the DOL Secretary’s actions and rules from judicial review.
The dramatic downsizing, if not dismantling, of the Environmental Protection Agency (the “EPA”) is also a distinct possibility given that President-elect Trump has selected an EPA Administrator who for decades has vigorously opposed a plethora of EPA regulations.
President-Elect Trump, not Congress, should appoint a Special Advisor to the President for deregulation” who would work out of the White House. He should assemble a team of APA experts who have the expertise and experience to rapidly eliminate tens of thousands of useless, outdated and, in some cases, stifling regulations. The Special Deregulation Advisor to the President would work closely with each Cabinet member and their senior staff to identify and separate the ‘wheat from the chaff’ and implement the downsizing quickly before the Potomac swamp rusts the wheel of the mill to a screeching halt.
There can be little doubt that after President–Elect Trump’s Inauguration on January 20, 2017, the U.S. economy will undergo dramatic deregulation unlike any era the country has ever experienced. For the next four years, many of Rousseau’s metaphorical chains that have shackled U.S. economic growth will be broken so that an unprecedented era of growth can emerge.
* Steven Robert Howard is an Adjunct Professor of Law at New York Law School