The Securities and Exchange Commission’s adoption of the Volcker Rule last month violated federal law because the agency failed to conduct a proper economic analysis of the measure, according to a letter from House Republican lawmakers.
Representatives Jeb Hensarling and Scott Garrett wrote SEC Chairman Mary Jo White today asking her to disclose the reason for omitting a separate economic analysis from the rule, which restricts proprietary trading by federally insured banks. Some courts have judged federal law requires the SEC to consider the economic impact of new regulations.
The SEC has been under pressure to improve analysis of its rules since a key corporate-governance change was overturned by the U.S. Court of Appeals for the District of Columbia in July 2011. Business groups such as the U.S. Chamber of Commerce have attacked the quality of SEC economic analysis when suing to block new rules.
The SEC’s Republican commissioners, Michael Piwowar and Daniel M. Gallagher, also criticized the lack of economic analysis of the Volcker Rule after its adoption on Dec. 10. Gallagher said he disagreed with other regulators’ position that a separate economic analysis wasn’t needed because the rule was adopted under the Bank Holding Company Act, which doesn’t require it.
Business groups, including the chamber, and Republicans say financial regulators should weigh the economic benefits of new rules against the cost of complying with them and any curbs on economic activity they cause.
John Nester, an SEC spokesman, declined to comment on the letter.
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