As we focus on slowing the spread of the coronavirus, agencies across the federal government are grappling with a difficult choice: Continue with business as usual, or halt rulemakings on anything not related to solving the Covid-19 pandemic.
But with the possibility of Democrats winning both the White House and Senate in November, the Trump administration is forging ahead with its regulatory agenda in light of the Congressional Review Act’s window for legislative review of final rules.
Citing the Covid-19 crisis, states attorneys general, governors, and Democrats in Congress have called for the formal pause on or extension of all outstanding public comment periods and the placing of a moratorium on new regulatory rulemaking. Sen. Sherrod Brown (D-Ohio) has been particularly vocal in demanding that the financial regulators suspend all rulemaking that could impede the federal response to the pandemic.
“The American people are scrambling to ensure they protect themselves, their families, and vulnerable individuals in society from this virus,” Brown wrote to Securities and Exchange Commission Chairman Jay Clayton. “Under these circumstances, it will be difficult for the public to have the customary engagement with government agencies and provide meaningful recommendations and comments on proposed rulemakings other than those related to the crisis at hand.”
However, the Trump administration has directed all agency rulemaking activities to continue and only extend comment periods after consultation with the Office of Information and Regulatory Affairs. SEC Chairman Clayton recently announced that his agency would delay action on certain rulemakings until at least May 1, but would not commit to delaying issuance of an important final rule that would change the proxy advisory and shareholder voting processes.
The Commodity Futures Trading Commission also announced the extension of certain currently-open comment periods in light of the Covid-19 pandemic, but Chairman Health Tarbert refused to stop rulemaking altogether.
“I respectfully disagree with those who insist our important policy work could or should be put on pause,” Tarbert said. “Now more than ever, our markets and the everyday Americans who rely on them are counting on us to get the job done. With the hard work of the CFTC’s talented and dedicated staff, we can strike the right balance to accommodate the current circumstances.”
The CFTC held a telephonic open meeting on April 14 and considered a series of both proposed and final rules.
Congressional Review Act in Spotlight
Should a Democrat win the presidency and the Democratic party regain control of the Senate (and maintain control of the House) in November, the Congressional Review Act (CRA) will emerge into the spotlight. That is why, in the midst of the Covid-19 outbreak, the Trump administration and independent agencies are likely pushing ahead with their regulatory agendas.
Included in a larger regulatory package signed into law in 1996, the CRA was a once rarely used procedural move by Congress to check agency rulemaking in the months leading up to an election. It has since become almost routine after the 2016 presidential election.
Under the CRA, agencies must report their final rulemakings to Congress and give members the opportunity to overturn the rules. Members of Congress may introduce a resolution disapproving of a rule, and—if both houses pass the resolution by simple majority vote—the resolution is submitted to the president for signature.
If the resolution is signed, the CRA states that the disapproved rule “shall not take effect (or continue)” and that a rule may not be issued in “substantially the same form” unless authorized by a further act of Congress.
The key to the CRA is in its timing. Once a final rule is submitted to Congress, the clock starts and Congress has 60 “days of continuous session” to submit a joint resolution disapproving the rule under the CRA. If Congress adjourns its annual session sine die within this 60-day period, the time period to act resets in the next session.
This timing becomes critical in a presidential election year when there is a change of occupancy in the White House and the same political party controls the executive branch and both houses of Congress. In November 2016, when Donald Trump won the presidency, the CRA stars aligned. Shortly after he was sworn in, President Trump and the Republican-controlled Congress used the CRA to reverse more than a dozen agency rules finalized under President Obama.
While the congressional calendar for the remainder of the 116th Congress is still in flux, it is expected that the deadline for finalized rules to fall outside the “window of purgatory” will hit sometime shortly before or after Memorial Day.
Agencies will need to submit their final rules to Congress before then lest the rulemakings become subject to potential reversal if Democrats win in November. At a minimum, proposed rules may be issued for public comment in order to reserve the “last word” on an issue in an attempt to influence future policy debates that take place after the election.
Until then and as all eyes now turn to a “Phase 4” coronavirus relief bill, it is possible we will see legislative language encouraging agencies to expedite consideration of certain rules that are not yet final.
Whether such encouragement is founded in a desire to combat the Covid-19 pandemic or to beat the CRA countdown clock will be for the history books to opine.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Josh Oppenheimer is an associate at Steptoe & Johnson LLP in Washington, D.C., and provides strategic advice on regulatory, legislative, and political issues with a focus on the financial services and retail sectors. He advises clients on securities, commodities, cybersecurity, and insurance laws at the federal and state levels.
Matthew B. Kulkin, co-chair of Steptoe’s Financial Services Group, is a former Commodity Futures Trading Commission division director who advises financial market participants on a wide array of legislative, regulatory, compliance, and enforcement matters.