Letter to Congress: AFR opposes Neomi Rao’s confirmation as Administrator of OIRA

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June 20, 2017

Dear Senator,

Americans for Financial Reform opposes the confirmation of Neomi Rao as Administrator of the Office of Information and Regulatory Affairs (OIRA). Professor Rao’s announced views demonstrate an extreme disregard for the independence of financial regulatory agencies and an unwarranted hostility to critical financial protections.

The principal financial regulators are independent agencies.[1] Accordingly, under presidents of both parties, rulemakings by these financial regulators have been conducted by their Presidentially-appointed, Senate-confirmed heads—with the assistance of agencies’ career subject-matter experts, but without substantive intervention by OIRA.[2]

This is sensible given that OIRA is poorly equipped to act as a super-regulatory agency with authority over the entire sweep of financial regulation. The office has only a few dozen employees covering all areas of the government who lack issue expertise in financial matters. By contrast, independent financial regulatory agencies collectively employ thousands of specialists. Moreover, independence of financial regulation from ordinary political influence is crucial to mitigate undue influence over regulatory decisions by private special interests. As a federal appellate judge recently observed, “there’s a pattern in the financial regulatory agencies of actually wanting to have some amount of separation [from the President] . . . to avoid financial cronyism in favor of faithful execution of the law.”[3]

Since 1935, the Supreme Court has protected Congress’s prerogative to create such independent agencies.[4] Despite this well-established law, Professor Rao has made clear that she believes agency independence is unconstitutional, regardless of Congress’s statutory design.[5] It is therefore reasonable to question whether she would adhere to these traditional limits on the OIRA Administrator, or properly advise the President regarding limits on his authority imposed by the other branches of government.

In addition, were OIRA to review rules promulgated by independent agencies using the same criteria as it does for other agencies, the Administrator of OIRA would exercise considerable discretion over financial regulatory rulemakings. Professor Rao’s few announced views on financial regulatory matters are concerning. For example, her opposition to the CFPB’s enforcement of the statutory prohibition on “abusive acts or practices,” and skepticism of the CFPB undertaking its other statutory responsibilities, suggest antipathy to strong consumer protection.[6] With little institutional or personal expertise in financial regulation, these ideological predispositions would be especially powerful drivers of OIRA decisionmaking under her leadership. These decisions will be critical given the Administration’s announced intention to embrace industry priorities to deregulate Wall Street,[7] and the Treasury Secretary’s assertion that much of this agenda can be implemented administratively.[8]

For these reasons, we strongly urge the Senate to reject Professor Rao’s nomination.


Americans for Financial Reform


[1] See, e.g., 44 U.S.C. § 3502(5) (“‘independent regulatory agency’” includes “the Board of Governors of the Federal Reserve System, the Commodity Futures Trading Commission, . . . the Federal Deposit Insurance Corporation, . . . the Federal Housing Finance Agency, . . . the Federal Trade Commission, . . . the Securities and Exchange Commission, the Bureau of Consumer Financial Protection, the Office of Financial Research, [and the] Office of the Comptroller of the Currency”). This definition is incorporated into the executive orders that govern OIRA regulatory review. See, e.g., Exec. Order No. 12291, Fed. Reg. (Feb. 17, 1981); Exec. Order No. 12866, Regulatory Planning and Review (Oct. 4, 1993).

[2] Congressional Research Service, Independence of Federal Financial Regulators: Structure, Funding, and Other Issues (R43391, Feb. 28, 2017), at 20-23; Office of Information and Regulatory Affairs: Federal Regulations and Regulatory Reform Under the Obama Administration: Hearing Before the Subcomm. on Courts, Communal & Admin. Law of the H. Comm. On the Judiciary, 112th Cong. 36-41 (2012) (statement of Sally Katzen) (“past presidents of both political parties have been reluctant to extend executive order requirements for economic analysis and centralized review by OIRA to the [independent agencies] out of deference to Congress”).

[3] Transcript of Oral Argument, PHH Corp. v. CFPB, No. 15-1177 (D.C. Cir. 2017), at 22.

[4] Humphrey’s Executor v. United States, 295 U.S. 602 (1935); Wiener v. United States, 357 U.S. 349 (1958); Morrison v. Olson, 487 U.S. 654 (1988).

[5] See Neomi Rao, A Modest Proposal: Abolishing Agency Independence In Free Enterprise Fund v. PCAOB, 79 Fordham L. Rev. 102 (2011); The Administrative State v. The Constitution: Dodd-Frank at Five Years: Hearing before the United States Senate Comm. on the Judiciary, Subcomm. on the Constitution (2015) (statement of Neomi Rao).

[6] Statement of Neomi Rao, The Administrative State v. The Constitution: Dodd-Frank at Five Years: Hearing before the United States Senate Comm. on the Judiciary, Subcomm. on the Constitution (July 23, 2015).

[7] Exec. Order No. 13772, 82 Fed. Reg. 9965 (Feb. 3, 2017); U.S. Department of Treasury, A Financial System That Creates Economic Opportunities: Banks and Credit Unions (June 2017).

[8] House Appropriations Subcomm. on Financial Services and General Government Holds Hearing on Treasury Department Fiscal 2018 Budget (June 12, 2017).