Open rule making February 29, 2012 at 9:05 pm
Here’s a good idea (which will never be implemented). From Bloomberg:
The lack of transparency is a problem. Interested parties can’t provide relevant input at the early stages of the process. Banks and their lobbyists get an advantage because they are able to secure far more frequent private meetings with Fed officials than less well-heeled organizations that tend to support reforms. And opacity weakens final regulations, which won’t have the credibility and endurance that come from being hashed out in the public arena.
Other U.S. agencies, such as the Securities and Exchange Commission and the Commodity Futures Trading Commission, have taken a different approach. In most cases, before they propose a rule, they hold open meetings at which commissioners, and sometimes other interested parties, pose questions to the staff members charged with the actual regulation writing. They post webcasts of the events prominently enough that a layperson can find them on the agency’s site.
The Fed would do well to follow their example.
I would go further, given that the CFTC and SEC rule making process can also be fairly opaque and pre-emptory. What should happen is that the agency first sets out its supervisory objective. It then invites proposals for rules that meet that objective. It considers feedback, takes the best ideas from the proposals, and produces a draft rule. Then there is an open meeting and impact analysis, then final rule making. Of course, that rather assumes that the supervisors know what objective they are trying to meet when they propose new rules…
Update. This story, again from Bloomberg, is encouraging. Someone (who isn’t SIFMA) is making detailed, intelligent comment as part of the rule-making process. That doesn’t mean that the process doesn’t need reform – it does – but it is nice to see a well-organized group of outsiders taking up the gauntlet. Go Occupy the SEC, go. I might not agree with all of your positions, but I think that your careful involvement in the process is wonderful.