Forbes published an article by Clyde Wayne Crews, Jr. about the lack of firm rules beign established by federal agencies in stead copius “interpretive guidance” are emplaced by agencies with little or no feedback to Congress for appropriate oversight or responsible limitation.
It’s not a new phenomenon, but today’s administrative state is increasingly characterized by agencies issuing “interpretive guidance” instead of troubling themselves with writing rules for public notice and comment (let alone waiting for Congress to pass a law).
Congress has explored the matter, most notably Sen. James Lankford’s (R-Oklahoma) series of hearings on “Examining the Use of Agency Guidance.”
Most recently, the abuse-of-guidance phenomenon has come to policymakers’ attention as a result of Sen. Pat Toomey’s (R-Pennsylvania) March 2017 query to the Government Accountability Office regarding an obscure 2013 “Interagency Guidance on Leveraged Lending.”
Toomey wanted to know whether the guidance regarding supervision of financial institutions (issued jointly by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation) was a “rule” for purposes of the 1996 Congressional Review Act (CRA).
That matters because the CRA provides Congress the opportunity to “veto” rules.
In brief, the 1996 Congressional Review Act requires rulemaking agencies to submit to both houses of Congress and to the Comptroller General of the Government Accountability Office (GAO) “a report containing” … “a copy of the rule” and a descriptive statement including whether or not it is “major” (sporting at least $100 million in annual impact).
(And further, if a rule does happen to be major, the CRA directs GAO to submit a separate report to Congress; GAO archives them all in a database.)
The important point is that the CRA gives Congress 60 legislative days to review a final major rule and pass a “resolution of disapproval,” which gets expedited treatment in the Senate. While this was one of the more important historically recent affirmations of congressional authority over the vast regulatory apparatus, until the Trump administration’s rejection of 14 rules in 2017, only one rule had been turned back (a Labor Department rule on workplace repetitive-motion injuries in early 2001).
The leveraged-lending guidance does seem fairly sweeping, whether deemed “major” or not. The agencies explained:
This guidance outlines for agency-supervised institutions high level principles related to safe-and-sound leveraged lending activities, including underwriting considerations, assessing and documenting enterprise value, risk management expectations for credits awaiting distribution, stress testing expectations, pipeline portfolio management, and risk management expectations for exposures held by the institution
The GAO’s answer to Toomey was yes, that it is “[c]lear the CRA covers general statements of policy,” and that the leveraged-lending notice should have been submitted to Congress for an opportunity to review and disapprove.
This is useful, but in principle the GAO doesn’t need to designate guidance as anything: guidance is simply subject to the CRA, period. This has long been known, and not something in dispute.
For example, in a 1999 Administrative Law Review article, Morton Rosenberg, then of the Congressional Research Service, described legislative history demonstrating that the scope of the CRA extended well beyond agency notice-and-comment rules. As Rosenberg explained, the CRA “intentionally adopted the broadest possible definition of the term ‘rule’ when it incorporated the APA’s [the 1946 Administrative Procedure Act] definition,” and was “meant to encompass all substantive rulemaking documents—such as policy statements, guidances, manuals, circulars, memoranda, bulletins, and the like—which as a legal or practical matter an agency wishes to make binding on the affected public.” Rosenberg noted that:
The framers of the legislation indicated their awareness of the now widespread practice of agencies avoiding the notification and public participation requirements of APA notice-and-comment rulemaking by utilizing the issuance of other, non-legislative documents as a means of binding the public, either legally or practically, and noted that it was the intent of the legislation to subject just such documents to scrutiny.
Interim findings by GAO nine and 17 years ago with respect to other federal agencies’ guidances (cited in its new letter to Toomey) likewise concluded that guidance counts as a “rule” for CRA purposes.
So, twenty-two years have passed since the CRA, and Congress has largely ignored its application to guidance.
A related problem described by Curtis Copeland has been that agencies often fail to properly submit even ordinary notice-and-comment rules to the GAO and Congress as required under the law, let alone guidance or statements of policy.
The submission is indispensable for both rules and guidance. By failing to submit rules, Copeland asserted, “the rulemaking agencies have arguably limited Congress’ ability to use the expedited disapproval authority that it granted itself with the enactment of the CRA.” With no report, Congress lacks the raw material it would need to contemplate a resolution of disapproval.
But even GAO itself is not really walking the talk. If you look at GAO’s form for agencies to use in carrying out their CRA reporting requirement (“Submission of Federal Rules Under the Congressional Review Act,” and see the photo above), you can see that there is no obvious spot for agencies to meaningfully report guidance.
In this way, GAO undermines is own stance. Along with an unmanageable proliferation of rule types, there are way too many varieties of guidance to cope with on such a form.
This torrent of regulatory dark matter tends to paralyze Congress, in the same way that hundreds of Obama rules were eligible for CRA rollback when Trump entered office but only 14 got the boot; and in the same way there has been little appetite for going back and revoking rules that were never properly submitted by agencies as required by the CRA (this phenomenon is detailed by Todd Gaziano’s Pacific Legal Foundation RedTapeRollback resource pages).
One Nation, Ungovernable. We have on our hands a deterioration of the rule of law that Congress cannot ignore. While the CRA has beckoned an unresponsive Congress since 1996, the GAO “leveraged lending” finding potentially opens up most of the profusion of guidance to scrutiny, if members like Toomey and Lankford insist. The Department of the Interior, for example, which issued 78 rules in 2015, boasts that its Fish and Wildlife Service usually publishes more than 500 Federal Register documents annually. Indeed some major policy plays people might have assumed were rules were instead assorted forms of guidance, and probably not “reported” to Congress and GAO properly.
The EPA’s Waters of the United States rule began as interpretive guidance before undergoing rulemaking;
The transgender bathroom policy (since revoked under Trump) was a “Dear Colleague.”
It would be useful to have legislation from Congress to explicitly affirm that guidance is subject to the CRA even though we know that it already is. New legislation should also require guidance to go through a more formal notice and comment procedure, at least in certain instances such as if it is economically significant. This is especially important with independent agencies that don’t get the traditional cost-benefit review oversight at the Office of Management and Budget that executive branch agencies purport to subject their rules to.
Well let’s just say it: every single regulatory reform legislation the Congress takes up henceforth needs to incorporate regulatory dark matter because the phenomenon is too significant to leave out.
But most immediately, we need a quick piece of legislation to clarify what counts as a “report” on guidance adequate to notify the House, the Senate and the GAO for CRA purposes. We cannot say that publication in the Federal Register suffices; we already had that for rules, but CRA required “reporting” regardless (again see the photo above and this link for the current incarnation).
The quick-fix legislation also needs to modify the GAO report template to more clearly account for types of guidance, not just types of rules. “Other,” as the report now allows, won’t cut it.
Congress must be ready for the blizzard. Morton Rosenberg characterized the apparent but unquantified high volume back in 1999. Since most of the material submitted to the Comptroller General per the CRA had been (and remains) ordinary notice-and-comment regulation, Rosenberg (1999, p. 1068) observed:
It is likely that virtually all the 15,000-plus non-major rules thus far reported to the [Comptroller General] have been either notice-and-comment rules or agency documents required to be published in the Federal Register. This would mean that perhaps thousands of covered rules have not been submitted for review. Pinning down a concrete number is difficult since such covered documents are rarely, if ever, published in the Federal Register, and thus will come to the attention of committees or members only serendipitously.
While an agency may choose not to trouble itself reporting guidance to Congress and GAO as required, those affected by guidance lack the luxury of ignoring it. If Congress finally sees the flurry in the form of new reports, perhaps it will take steps to scale down the administrative state. With the proliferation of guidance, the priestly administrative state underscores its inappropriateness for a modern constitutional republic, quite apart from the notion of agency expertise that unconvincingly rationalized its creation in the first place.
The article was originally published by Forbes.