Two wide-ranging regulatory proposals from Republican presidential candidate Mitt Romney, which so far have received scant attention, could put the brakes on implementation of the Dodd-Frank Act. Taken together, these proposals would make it harder for regulatory agencies to enact new regulations.
Under Romney's plan, agencies would be required to eliminate existing regulations whenever they implement new ones. Congress would also have a much easier time blocking regulations that are proposed by the agencies.
Even if the courts eventually struck down Romney's proposals - the policies would likely spark legal challenges - they could force delays at agencies such as the Federal Reserve Board, the Federal Deposit Insurance Corp. and the Consumer Financial Protection Bureau. "I think it becomes another arrow in the industry's quiver," said Sidney Shapiro, a Wake Forest University law professor who is critical of Romney's proposals.
The Romney campaign did not respond to a request for comment, but regulatory experts who champion similar ideas contend that federal agencies need to be held more accountable for the costs their regulations impose on the economy.
Richard Williams is director of policy research at George Mason University's Mercatus Center, which publishes report cards on rules issued by a range of federal regulators, including banking agencies. After grading "every economically significant rule," the average grade was an F, he says. "There just doesn't seem to be enough incentive for them to get it right."
Treasury Secretary Timothy Geithner vowed in 2010 to eliminate rules that did not work, and to streamline and simplify rules wherever possible. But more than a year later, Geithner acknowledged that he had not made much progress.
Romney has provided little detail about how he views banking issues, except to say he would repeal Dodd-Frank and replace it with a "streamlined regulatory framework."
But his economic plan lays out two other proposals that would impact the banking regulators - ideas that could defang Dodd-Frank even if the law remains on the books. One proposal would require agencies that are issuing new regulations to go through a budget-like process to identify offsetting cost reductions in existing regulations.
"While not a panacea for the problem of over-regulation, implementation of this conservative principle would go some distance toward halting the relentless growth of the regulatory state," Romney's economic plan states.
The proposal - sometimes known as a regulatory cap - is similar to an idea put forward in 2010 by Sen. Mark Warner, D-Va. Warner said at the time that he wanted to require federal agencies to eliminate one existing regulation for each new regulation they want to add.
Nearly two years later, Warner has yet to introduce legislation on the issue. The Virginia Democrat is backing off the approach of eliminating one regulation for each one added, according to a spokesman, but he still wants to require agencies to clear out the accumulated regulatory clutter.
Romney's second proposal would make it easier for Congress to overturn regulatory proposals from the agencies. Under a 1996 law, Congress already has the ability to overrule a proposed regulation. But Congress often has a hard time finding agreement, and it has used its 16-year-old power sparingly.
Romney is backing a bill that would flip the script put in place by the 1996 law - by preventing proposed regulations from taking effect unless Congress acts.
The measure, which passed the Republican-controlled House of Representatives last year but is a non-starter with Democrats, would require both the House and Senate to approve all proposed rules with an economic impact of more than $100 million.
Romney is vowing to take action on the measure even if Congress doesn't. "If Congress declines to enact such a law, a President Romney will issue an executive order instructing all agencies that they must invite Congress to vote up or down on their major regulations and forbidding them from putting those regulations into effect without congressional approval," the former Massachusetts governor's economic plan states.
Regulatory experts who are critical of Romney's approach raise legal concerns about the efforts to rein in regulatory agencies.
If Romney issues broad executive orders-for example, instructing agencies to eliminate old regulations in order to make room for new ones, and preventing proposed regulations from taking effect unless Congress approves them - those orders could conflict with existing laws, according to these critics.
"If an agency is required by law to do something, the president, no matter which president, must faithfully execute the law," said Sally Katzen, a former administrator of the Office of Information and Regulatory Affairs during the Clinton administration. When Congress instructs an agency to write a regulation, the agency may only repeal that regulation if Congress changes the law, Shapiro said.
"So it's really hard to see how a banking agency could say we're not going to regulate because there's a regulatory cap - because a regulatory cap is not one of the factors that they're ordered to take into account," he said.
The counterargument is that in many instances Congress makes broad delegations of authority to the agencies, which are not legally required to write any specific regulation.
"Sometimes the authority that's been delegated to agencies is so general or so expansive that they can make a decision to contract their regulatory oversight that they're exercising, or the burden they're imposing," said Michael Hunter, chief operating officer of the American Bankers Association.
Moreover, some object to the regulatory cap because it only looks at the costs of regulation, and not the benefits. For decades, presidents of both parties have instructed executive branch agencies to conduct analyses of both the costs and benefits of proposed regulations.
"The benefit side of the ledger seems to be ignored both for the proposed regulation and for the old regulation that you'd need to get rid of," said Richard Murphy, a Texas Tech University law professor.
On the other hand, the process of analyzing costs and benefits is fraught with controversy, largely because it is often difficult to measure the benefits of new regulations. Experts who are skeptical of regulation argue that a proposal like Romney's regulatory cap might defuse those arguments.
"By focusing on the costs of regulations and allowing agencies to set priorities and make tradeoffs among regulatory programs, it might remove some of the contentiousness surrounding benefit-cost analysis," Susan Dudley, a former administrator of the Office of Information and Regulatory Affairs during George W. Bush's administration, stated in 2011 congressional testimony.
There is one point that both critics and supporters of efforts to rein in regulatory agencies agree on: the Romney plan would have a big impact on the ultimate shape of Dodd-Frank.
"There's no question that there could be a change in how Dodd-Frank is being interpreted and implemented," Hunter said.