The Best Republican Idea

June 9, 2016 at 9:35 am Leave a comment

There is a lot of Red-Meat election year nonsense in The Financial CHOICE Act unveiled by Representative Hensarling on Tuesday; This is, after all, an election year, and the proposal has as  much to do with laying out a contrasting vision of financial regulation than it does about getting anything done before this Congressional session is over.

That being said, one of the proposals that intrigues me the most is to “Repeal the so-called Chevron deference doctrine.” This may sound esoteric compared to proposals to neuter the CFPB director, extend the exam cycle and allow banks to opt out of Basel III capital requirements, but it could put the brakes on a regulatory process that many of us believe has gone haywire. Here’s why.

An agency’s power to regulate comes from a legislative Act. For example,  the Durbin Amendment was a law from Congress directing the Federal Reserve to cap debit card interchange fees. And Congress empowered the CFPB to regulate consumer protection laws in the Dodd frank Act.   That’s why a regulated entity like a credit union can sue to block a promulgated regulation which goes beyond a regulator’s authority and why the NCUA got an opinion letter on its ability to impose risk based capital requirements on Well Capitalized credit unions.

Now this may come as a shock but much legislation is vaguely written. So what is a court to do when it is faced with a challenge to a  regulation implementing a statute that is capable of more than one interpretation? This is what the Supreme Court told the Courts to do:    “ First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress. If, however, the court determines Congress has not directly addressed the precise question at issue, the court does not simply impose its own construction on the statute, as would be necessary in the absence of an administrative interpretation. Rather, if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency’s answer is based on a permissible construction of the statute. Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 842-43, (1984).

Critics of this framework argue that  it has evolved into a rule of law that  gives regulators too much flexibility to make de facto laws called regulations. Many statutes are capable of being interpreted in more than one way and, when they are, the Courts must generally defer to an agency’s interpretation.  Combine this power with the wide-ranging power of regulators to issue Guidance interpreting their regulations and you end up with a system In which the Executive Branch can impose mandates without getting laws passed and in which  the Director of the CFPB has more power than any elected official besides the President.

To all of you out there who think I am shilling for The Man I will tell you what I told A WSJ reporter the other day: How much executive power do supporters of government by regulation want to hand to a President Trump?

Doing away with Chevron deference would return the power to interpret statues to the place where it ultimately belongs under the constitution: The courts. It would also encourage better drafting by Congress.  Parts of Dodd Frank read like a regulatory to-do list.  Perhaps if Congress knew that their  work  was going to be reviewed by judges without deference to the views of a  regulator with whom  they have dealt  with for years legislation would actually read like legislation.

One more thing. As a judicially created doctrine the Supreme Court could eliminate Chevron in a future case.  Before the Death of Justice Scalia I would have said it was headed in that direction.  For  those who want the Court to reexamine the framework it uses to evaluate regulations this makes the views of the next justice all the more important.



Entry filed under: General, Legal Watch, Political.

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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