The Regulatory Cliff

[Wiseacre]

Most people know about the looming fiscal cliff, with big tax increases and spending cuts set to go into effect if the pols in Washington don't do something about it. It is possible that whatever the resolutions are that come out from the negotiations, there is also another area of concern that could adversely affect the economy, and it may not wait for the first of the year either. I refer to a regulatory cliff, in which the Obama administration releases a bunch of new regs that they've been sitting on for several months until the election is over. One assumes that if these changes were positive ones for the economy, there would be no reason to delay them; it appears to be obvious that they didn't want to debate the new rules and regs because too many people might not be too happy about it.
So why should anyone think that a logjam of new regs are forthcoming? First of all, there is a document called the Unified Agenda kept by the White House Budget Office that is supposed to show new regs under development or consideration; there are federal laws and executive orders that require an updated Agenda every 6 months, but it hasn't been published since fall 2011. Ask yourself why.

And this from the link below:

" In an average year, about 650 significant regulations are reviewed by the Office of Information and Regulatory Affairs, which is housed inside the Office of Management and Budget. Through Election Day, the Office had only reviewed 359, and at the time of this writing, that number had grown to only 373. "
.
" A large number of rules currently being reviewed by the Office of Information and Regulatory Affairs have been under review for much longer than normal. Executive Orders explicitly limit the Office's review time to a maximum of 90 days unless special extensions are granted. The average review time in the first three years of the Obama administration was 50 days, and since 2000, the average has been 54 days. So far this year, the average is 72 days, and will probably increase dramatically. Right now, 130 different rules have been sitting at the Office of Information and Regulatory Affairs for more than 90 days, which is not normal. Typically, the Office gets its reviews done as quickly as possible so that the regulatory agencies can move along with their work. Now, the Office is sitting on a backlog of 130 rules, and could potentially push them out the door in a hurry if it wanted to. "

So, what's going on? As the article says, maybe the WH is waiting for the economy to get a little stronger. Or they're not sure they'll have the funding to support the new programs that result from the changes. Or they're waiting to see how the fiscal cliff debacle is resolved. Doesn't sound like these guys, they bull ahead anyway. But the bigger issue is what will the impact be on an already fragile economy if Obama dumps a boatload of new rules and regs on us?

Obama's Re-Election May Bring Flurry of Regulation - Economic Intelligence (usnews.com)

This post is already getting too long, so I'll write followup posts on what could be coming and what it could cost.

 

[Wiseacre]

So, what new rules are we talking about, and what might the effect be? The information below comes from a piece in the Wall Street Journal, written on Nov 23, 2012. Let's start with healthcare, according to the WSJ:

" since Election Day, the Health and Human Services Department has submitted a raft of key health rules for White House review that it has been sitting on for months. Three of the rules were released right before Thanksgiving, so insurers are only now about to learn how they'll design and price coverage, since one new rule defines "essential benefits" they must include. Another deals with limits on how premiums can vary from person to person based on risk. "

Then there are the exchanges, which nobody really knows how they will work. Can you imagine being a businessman trying to figure out how to determine HC costs for your employees, nobody is going to hire more full-time people without knowing what the costs are going to be. Nobody knows what the eligibility rules will be for who's eligible for the exchanges, or how Medicaid rules willchange, or what the Medicare Asvantage options will be.

And the Independent Payment Advisory Board (IPAB), which is supposed to cut Medicare reimbursement rates to doctors and hospitals without reducing benefits to patients. The IPAB isn't coming right away, but it IS coming. We've already seen many doctors and hospitals refusing to take future Medicare patients or retiring.

Review & Outlook: Here Comes the Regulatory Flood - WSJ.com

 

[Wiseacre]

Next up, the financial sector.

snippet:

" According to a Davis-Polk analysis, only 133 or 33.4% of the 398 rule-makings the law firm estimates Dodd-Frank requires have been finalized. The law is ambiguous and other reviews suggest the figure could be closer to 500. As of November 1, some 132 rules haven't even been proposed, while the government has failed to meet 61% (or 144) of Dodd-Frank's legal deadlines. "

And:

" Regulators are now finalizing rules on bank stress testing and capital and margin rules for the swaps markets, but there are still many costly items on the to-do list. Major uncertainty comes from the rolling exercise to determine which businesses are "systemically important," aside from the largest banks that have already been designated as too big to fail. This review never ends. "

And:

" Also on the docket is an effort to define "qualified mortgages," which will change lending and capital standards. Elizabeth Warren's Consumer Financial Protection Bureau, having been invested with unaccountable powers, will now decide what financial products and services are "abusive," a political term of art with no legal meaning. Then there is the pending Volcker Rule to limit proprietary trading at big banks, whose draft ran to 298 pages and asked 1,347 questions. "

Seriously, does this sound like competancy to you? The D-F Bill was signed into law more than 2 years ago, and nobody knows what it'll do or how it'll work? There are signs the housing market may have hit bottom and is about to recover, at least in some places. But I don't know how that can continue until the new rules and regs are inplace and everyone understands them. People have to know what "abusive" means, andwhat you can and can't do.

Review & Outlook: Here Comes the Regulatory Flood - WSJ.com

 

[Wiseacre]

Ah yes, the EPA. It looks like the EPA went on hiatus for most of this year, but I'm thinking that is about to change. The following is from a piece by Sen Rob Portman (R) that appeared in the WSJ back in August.

snippet:

" Then there is the mega-rule on the shelf at the Environment Protection Agency (EPA) that could block business expansion in many areas of the country. Proposed in 2010, the Ozone Rule would impose a limit on ozone (which creates haze from emissions from cars, power plants and factories) so strict that up to 85% of U.S. counties monitored by the EPA would be in violation.

Susan Dudley, a regulatory economist at George Washington University who served in the previous administration, notes that this rule would force many communities "to forego productive investment and hiring decisions in order to spend hundreds of billions of dollars per year in vain attempts to meet unachievable standards."

The EPA itself says the rule could impose up to $90 billion in yearly costs on manufacturers and other employers. Last September, after months of public outcry, the White House instructed the EPA to put the rule on ice until 2013, when it will be "revisited." "

Rob Portman: The Regulatory Cliff Is Nearly as Steep as the Fiscal One - WSJ.com

Sheila Jackson, head of the EPA, is sure to continue the war on fossil fuels, specifically coal. Greenhouse gas emission standards for new power plants will likely be set so high that few will be constructed. Penalties for existing coal-fired plants will be raised that will make them uneconomical to run; they used to make up more than half of US power generation. And new rules are also on the way for fracking natural gas, an industry that could make us energy independent and create a lot of new jobs. Good paying ones too.
I will say this: if the economy tanks in 2013 or 2014, some of this stuff could be relaxed or even reversed. When people's gas and utility bills start to go up, Congress will go on the warpath, even some democrats will join in.

 

[Wiseacre]

According to many surveys of small business people, the cost of regulations and the uncertainty of what's going to happen are influential in making the decision to hire. By some estimates the the costs of compliance is over a trillion and a half dollars per year, and rising. We are choking our own economy to death here and it ain't just the cost, it's the aggravation. Sure we need adequate regulation, but it looks like we're in overkill mode. And getting worse. Couple this with the higher taxes that are likely coming, and it gets tough to be optimistic about our economic future in the short run.

 

[Duped]

Everything is complicated, and voluminous - damn lawyers - it needs to be simplified, and streamlined! Look at the founding douments - cogent, and encompassing!

 

[Greenbeard]

The most important void is ObamaCare's "exchanges," the clearinghouses where millions of individuals and small business will receive subsidized coverage. HHS hasn't said how they must be set up and function in practice, with the exception of "guidance" documents that make vague suggestions but don't have the force of law and are likely to be revoked.

The rules were out three days before that WSJ piece was published. Surprise, they ended up following the guidance documents (not to mention the literal text of the law) closely:

There are few surprises in this proposed rule for those who have been following guidance issued to date on the issues it addresses. In general it reduces to rule form the literal requirements of the ACA. But it does give insurers additional flexibility on some issues, such as the coverage of habilitative services or setting deductibles for low actuarial value small-group plans.

"Likely to be revoked" indeed. Those seeing ambiguity here are likely those with a delusionally sinister view of this administration that's quite detached from reality.

 

[OKTexas]

The most important void is ObamaCare's "exchanges," the clearinghouses where millions of individuals and small business will receive subsidized coverage. HHS hasn't said how they must be set up and function in practice, with the exception of "guidance" documents that make vague suggestions but don't have the force of law and are likely to be revoked.

The rules were out three days before that WSJ piece was published. Surprise, they ended up following the guidance documents (not to mention the literal text of the law) closely:

There are few surprises in this proposed rule for those who have been following guidance issued to date on the issues it addresses. In general it reduces to rule form the literal requirements of the ACA. But it does give insurers additional flexibility on some issues, such as the coverage of habilitative services or setting deductibles for low actuarial value small-group plans.

"Likely to be revoked" indeed. Those seeing ambiguity here are likely those with a delusionally sinister view of this administration that's quite detached from reality.

Yep, just zoom in on that Maobamacare and ignore the regs from the EPA, then we'll understand your surprise that manufactures are moving jobs offshore. Of course you'll blame Bush, right? Can you say 90 billion a year in compliance costs.

 

[waltky]

Bailout thief charged...

Former trader charged with defrauding bailout fund
28 Jan.`13 — A former managing director of an investment bank was arrested Monday on charges he defrauded investment funds the Department of Treasury established in 2009 as part of the federal government's response to the financial crisis.

A federal grand jury in Connecticut returned a 16-count indictment charging 38-year-old Jesse C. Litvak of New York City with securities fraud, Troubled Asset Relief Program fraud and making false statements to the federal government, prosecutors said. The indictment alleges Litvak, while a registered broker-dealer and managing director at Jefferies & Co., Inc. who worked on the company's trading floor in Stamford, engaged in a scheme to defraud customers on residential mortgage-backed securities trades. "As alleged, the defendant defrauded six funds established by Treasury and funded principally with government bailout money," U.S. Attorney David Fein said. "Illegally profiting from a federal program designed to assist our nation in recovering from one of our worst economic crises is reprehensible."

Authorities say Litvak defrauded the six funds and private investment funds of more than $2 million. According to the indictment, Litvak was terminated from the company in 2011. Litvak pleaded not guilty Monday in U.S. District Court in Bridgeport. His attorney, Patrick J. Smith, denied he defrauded anyone. "These were principal transactions between sophisticated market participants," Smith said in a statement. "All of the profits that Jefferies earned on each trade were well within industry norms for the mortgage-backed bonds in this case. Jesse Litvak did not cheat anyone out of a dime. In fact, most of these trades turned out to be hugely profitable."

The indictment alleges Litvak misrepresented asking and selling prices, keeping the difference between the price paid by the buyer and the price paid to the seller for Jefferies. In other transactions, Litvak misrepresented to the buyer that bonds held in Jefferies' inventory were being offered for sale by a fictitious third-party seller, which allowed Litvak to charge the buyer an extra commission that Jefferies was not entitled to, authorities said. "As most Americans tried to keep their heads above water during the financial crisis, Jesse Litvak is charged with trying to profit from the taxpayer-funded bailout known as TARP," said Special Inspector General for TARP Christy Romero. "The charges paint a picture of Litvak shamelessly lying to dupe the government into overpaying for mortgage securities with bailout funds."

The indictment charges Litvak with 11 counts of securities fraud, which carry up to 20 years in prison on each count, one count of TARP fraud, which carries a maximum term of imprisonment of 10 years, and four counts of making false statements, which each carry a maximum prison term of five years if convicted.

Source