Hal S. Scott is the Emeritus Nomura Professor of International Financial Systems at Harvard Law School.
This short article is intended to stimulate discussion of the Office of Management and Budget’s (the “OMB”) April 11, 2019 Memorandum (the “OMB Memo”) regarding the obligations of independent agencies. The OMB Memo was issued to all federal agencies, including independent agencies, to establish a centralized review of agency rules by OMB’s Office of Information and Regulatory Affairs (“OIRA”). The need for such review was based on OIRA’s responsibility under the Congressional Review Act (the “CRA”) to determine whether regulatory rules are “major.”
The OMB Memo raises important legal and policy questions. It could be read to require, for the first time, that independent financial regulatory agencies (“IFRAs”) conduct a cost-benefit analysis under OIRA methodology of all proposed rules, and that such analysis be reviewed by OIRA. Additionally, if OIRA were to reject the adequacy of such cost-benefit analysis, OIRA might be able to prevent the rule from going into effect. Whether such OIRA powers can be justified under the CRA is an important legal question. The OMB Memo raises further legal questions as to whether it is consistent with outstanding Presidential executive orders and is by its own terms binding on the IFRAs rather than being merely precatory. In the big picture, the question is whether the OMB Memo is consistent with the purpose of the CRA, which is to permit congressional (not executive) veto of proposed regulations, and whether it excessively infringes on the independence of the IFRAs.