Barack Obama’s biggest second-term challenge isn’t guns or immigration. It’s saving his biggest first-term achievements, like the Dodd-Frank law, from being dismembered by lobbyists and conservative jurists in the shadowy, Byzantine “rule-making” process.
Two months later, two powerful industry groups, who together represent the biggest speculators in the world, hired Eugene Scalia, the son of Supreme Court Justice Antonin Scalia, as their lead counsel, and launched a lawsuit against the CFTC. The Securities Industry and Financial Markets Association and the International Swaps and Derivatives Association were suing on the same grounds that the exchange executives’ lawyer had cited in that meeting with Chilton a year earlier: the CFTC had not demonstrated that establishing position limits was necessary and appropriate, they claimed. They also argued that the commission had not sufficiently studied the economic impact of the rule.
House Democrats and nineteen senators, some of whom had drafted Dodd-Frank, petitioned the court to rule in favor of the CFTC, a handful of op-eds beseeched judges to do the right thing, and financial reform advocates called foul.
None of it made a difference. In September 2012, the U.S. Court for the District of Columbia Circuit overturned the CFTC’s rule. In the decision, the court wrote that the commission lacked a “clear and unambiguous mandate” to set position limits without first demonstrating that they were necessary and appropriate. And with that, more than two years after the passage of Dodd-Frank, there were still no federally administered position limits for any commodities except grain, and the CFTC was back to square one. The muckety-mucks at the exchanges rejoiced, as appropriate.
Welcome, dear readers, to the seventh circle of bureaucratic hell.
As Obama begins his second term, all the talk in Washington is about whether ongoing congressional gridlock and soul-crushing partisanship will block the administration from achieving significant legislative victories, be they immigration reform, a big fiscal deal, or an infrastructure bank. But at least as important to the future of the country and to the president’s own legacy is whether that potentially game-changing legislation he signed in his first term—like the Affordable Care Act and Dodd-Frank, as well as a slew of other landmark bills—is actually implemented at all.
It may seem counterintuitive, but those big hunks of legislation, despite being technically the law of the land, filed away in the federal code, don’t mean anything yet. They are, in the words of one CFTC official, “nothing but words on paper” until they’re broken down into effective rules, implemented, and enforced by an agency. Rules are where the rubber of our legislation hits the road of real life. To put that another way, if a rule emerges from a regulatory agency weak or riddled with loopholes, or if it’s killed entirely—like the CFTC’s rule on position limits—it is, in effect, almost as if that part of the law had not passed to begin with.
As of now, there’s no guarantee that either Obamacare or Dodd-Frank will be made into rules that actually do what lawmakers intended. That’s partly because the rule-making process is a dangerous place for a law to go. We might imagine it as a fairly boring assembly line—a series of gray-faced bureaucrats diligently stamping laws into rules—but in reality, it’s more of a treacherous, whirling-hatchet-lined gauntlet. There are three main areas on this gauntlet where a rule can be sliced, diced, gouged, or otherwise weakened beyond recognition.
The first is in the agency itself, where industry lobbyists enjoy outsized influence in meetings and comment letters, on rule makers’ access to vital information, and on the interpretation of the law itself.
The second is in court, where industry groups can sue an agency and have a rule killed on a variety of grounds, some of which make sense and some of which most definitely do not.
The third is in Congress, where an entire law can be retroactively gutted or poked through with loopholes, or where an agency can be quietly starved to death through appropriations bills.
And here’s the really alarming part: rules run this gauntlet largely behind closed doors, supervised by people we don’t elect, whose names we don’t know, while neither the media nor great swaths of the otherwise informed public are paying any attention at all. That’s not because we don’t care what happens; we do. After all, millions of us spent the better part of a year closely monitoring the battles to pass Obamacare and Dodd-Frank. Remember? It was high drama! Every detail was faithfully chronicled in front-page headlines and long disquisitions on The Rachel Maddow Show; in countless posts by wonky bloggers, who dissected every in and out, every committee hearing, every new study about the public option or the Volcker Rule.
That kind of stuff is the Washington journalist’s bread and butter: the artful, insidious process by which a bill becomes a law. And since reporters know how the process works, how influence gets wielded and where the pressure points are, the rest of us were able to follow along closely. We knew what to root for, what to keep our eye on, and which decision makers in Washington we could remind to do the right thing.
But fast-forward a couple of years, and as the fate of those very same laws is being determined in the rule-making process we’ve found ourselves distracted by new shiny objects, like women in combat and how Pennsylvania will allocate its electoral votes in 2016. Part of the reason for that, no doubt, is that many Washington journalists, underpaid, overworked, and required to write a dozen blog posts a day, don’t have time to dedicate to following the rule-making process. Others simply don’t understand it.
Regardless, the result is that the rest of us haven’t followed the progress of these landmark laws in anywhere near the same way that we followed it during the legislative process. And in our inattention we’ve made it infinitely easier for industry lobbyists and members of Congress who voted against the laws to begin with to destroy them by subtle, nuanced, backdoor means. By quibbling over “as appropriate”s and misplaced verbs. By crafting crafty legal arguments and drowning understaffed rule makers in industry-funded hogwash. This is the way a law ends: not with a bang but with a whimper.
Feed the Political AnimalDonate
Washington Monthly depends on donations from readers like you.