Last week the Trump Administration continued its focus on deregulation by issuing two Executive Orders, one requiring executive agencies to cut two regulations for every new one they promulgate, and a second one setting forth principles for executive agencies to follow in promulgating financial regulations.
The first Order, entitled “Presidential Executive Order on Reducing Regulation and Controlling Regulatory Costs,” requires that, unless otherwise prohibited by law, if an executive agency or department proposes a new regulation, it must identify at least two existing regulations to be repealed. This Order further provides that for fiscal year 2017: i) the total incremental cost of all of an agency’s new regulations, including repealed regulations, shall be no greater than zero; and ii) any new incremental costs associated with new regulations shall be offset by the elimination of existing costs associated with at least two prior regulations.
The Director of the Office of Management and Budget (“OMB”) is to provide guidance on implementation of this Order, including standards for determining what qualify as new and offsetting regulations. Interim guidance was issued on February 2, 2017, by the OMB. Exempt from this Order are regulations dealing with U.S. military, national security, or foreign affairs functions, and regulations related to agency organization, management or personnel, as well as any other exemptions determined by OMB.
As noted in our previous blog post on the regulatory freeze, independent agencies such as the Federal Reserve Board (“FRB”), the Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”) are not covered, but may be affected indirectly as a result of joint rulemakings with a department or agency that is subject to the Order and a desire to maintain regulatory consistency across agencies in those joint regulations. In addition, the OMB’s interim guidance encourages independent agencies to identify existing regulations that, if repealed or revised, would achieve cost savings that would fully offset the costs of new significant regulatory actions.
The second Order, entitled “Presidential Executive Order on Core Principles for Regulating the United States Financial System,” sets out “Core Principles” for the regulation of the U.S. financial system:
- Empowering Americans in making financial decisions
- Preventing taxpayer-funded bailouts
- Fostering economic growth and vibrant financial markets through more rigorous regulatory impact analysis
- Enabling American companies to be competitive with foreign firms both here and abroad
- Advancing American interests in international financial regulatory negotiations and meetings
- Making regulation efficient, effective and appropriately tailored
- Restoring public accountability within Federal financial regulatory agencies and rationalizing the Federal financial regulatory framework
The Secretary of the Treasury is directed to consult with the heads of the agencies of the Financial Stability Oversight Council (“FSOC”) within 120 days (and periodically thereafter) and report to the President on the extent to which current U.S. financial regulatory requirements promote and support the Core Principles, as well as identifying any requirements that are inconsistent with the Core Principles. The FSOC was formed as part of the Dodd-Frank Act (“Dodd-Frank”), and includes the U.S. Federal financial regulators, such as the FRB, SEC, CFTC, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, and the Consumer Financial Protection Bureau.
While the second Order does not mention Dodd-Frank by name, public statements from the President indicate that Dodd-Frank is indeed a key focus of this review. With the FSOC report due in 120 days, and with more specific proposals certain to be introduced in Congress in the coming weeks and months, the future of U.S. financial regulation remains to be seen.
Updated to include link and to conform to official Federal Register notice