From the New York Tines: F.C.C. Moves Toward Restoring Net Neutrality Rules, Igniting Regulatory Fight

Rulemaking . . . 

- Click here for the article. 

The Federal Communications Commission voted on Thursday to move forward on a proposal to restore open internet rules, which were repealed during the Trump administration, with a final vote likely to come next year.

The commissioners at the Democratic-led agency voted 3 to 2 along party lines to kick off a monthslong process to bring back so-called net neutrality regulations that prohibit broadband providers from blocking or slowing down services like Google and Netflix on their networks.

Telecommunications companies that provide broadband and Republicans have vowed to fight the proposal, saying it will be too much of a burden on broadband providers.

By voting to move ahead with a proposal to restore net neutrality, the F.C.C. is broadening its reach.

The move will ultimately enable the agency to categorize high-speed internet as a utility, like water or electricity. That is a major step toward modernizing the agency’s objectives, especially as consumers increasingly depend on the internet as their main source for communications. The agency will then be able to police broadband providers for net neutrality violations, consumer harm and security lapses.

“Now is the time for our rules of the road for internet service providers to reflect the reality that internet access is a necessity for daily life,” Jessica Rosenworcel, the chair of the F.C.C., said in a statement.

From the Washington Post: SEC chair to step down, clearing path for Trump to eliminate tough Wall Street regulations

We discussed the Securities and Exchange Commission in GOVT 2305 when we covered both the executive branch and economic policy. It is an independent regulatory commission with the following mission: to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. Liberals have been attempting to use its power to reign in the financial sector following the financial crash of 2008. Those efforts now seem over with Trump's election.

- Click here for the article.

Mary Jo White, the head of the Securities and Exchange Commission, announced Monday that she will step down nearly three years before the end of her term, clearing the way for President-elect Donald Trump to reshape the way Wall Street is regulated.

The SEC, which polices Wall Street and the financial markets, has been a key part of the Obama administration’s effort to rein in big banks following the 2008 financial crisis and prevent future taxpayer bailouts of the industry. The agency has pushed for more oversight of hedge funds and other asset managers, and established rules that make it more difficult for big banks to make risky bets on the markets.

White, a former federal prosecutor, is known for a no-nonsense style and attempted to beef up the agency’s enforcement efforts over the last three years, pushing for more companies to admit guilt and taking more cases to trial. But progressive Democrats were often critical of her efforts, complaining they did not go far enough.

Trump has already indicated he would usher in a period of deregulation, including dismantling 2010’s financial reform legislation, known as the Dodd Frank Act. He appointed Paul Atkins, an industry veteran, who has called Dodd Frank a“calamity,” to lead the agency’s transition.

Atkins “is a guy in general who wants to let companies do their thing and not get in the way very much,” Ian Katz, a financial policy analyst with the research firm Capital Alpha Partners, said of Atkins. “You would see a lighter touch on enforcement and a lighter hand on corporate governance issue broadly.”

Atkins served as an SEC commissioner for six years during the President George W. Bush administration.

For more:

- U.S. Securities and Exchange Commission.
- Mary Jo White.
- Securities Exchange Act of 1934.
- Independent Regulatory Agencies.

From Vox: Why critics are worried about the new FDA boss Dr. Robert Califf has close ties with the pharmaceutical industry

Classic - potential - case of agency capture.

- Click here for the article.

The Food and Drug Administration, which regulates about a quarter of every dollar Americans spend, has a new boss — and he's already under fire for beingtoo cozy with the pharmaceutical industry.

Dr. Robert M. Califf, a cardiologist and researcher, was nominated by President Obama in September to become the new commissioner of the agency. Hisconfirmation by the Senate was delayed by lawmakers, many of them Democrats, who worried that his links with the pharmaceutical industry would bias his ability to regulate that business and who voiced disapproval over the FDA's handling of the opioid abuse crisis in America.

"F.D.A. stands for Food and Drug Administration, but over the last 20 years it really stands for ‘fostering drug addiction,' " Sen. Edward J. Markey (D-MA), said in a Senate floor speech today.

Despite the reservations, Califf was officially confirmed to the position in a 89 to 4 vote.
Califf has worked with many drugs companies, as both a paid consultant and through his research. As Scientific American points out, "In a recent article in the New England Journal of Medicine, Califf listed over a dozen pharmaceutical companies in his conflict-of-interest disclosure."

Unlike previous commissioners, he did not come from a public health background. Instead, the New York Times reported, he "ran a multimillion-dollar clinical research center at Duke University that received more than 60 percent of its funding from industry."

The Revolving Door: Bracewell & Giuliani attorney to head SEC's Texas regional office

Students will notice that I like to discuss this central feature of politics on all levels of government - one that helps tie interest groups with the various branches of government. This can negate the checks and balances and make it more likely that these branches work together to provide benefits for a well connected group. One of the more effective ways to do so is to control the executive agency that regulates the industry the group is involved in.

This story is today's illustration of this phenomenon;

- Click here for it.
- Click here for a bio of Shamoil T. Shipchandler.

The individual in question went from the U.S. Justice Department (where he served as "Assets Forfeiture Chief" and focused on fraud) to Bracewell & Guiliani (where he represented clients accused of fraud. Now he is expected to take those skills to the Securities and Exchange Commission. If you are paying attention, this means that Mr. Shiplander has gone from prosecuting white collar crime to defending white collar crime to regulating white collar activities.

Note that Bracewell & Guiliani is not only a law firm, but a lobbying form as well - the two jobs overlap.

From the story:

Legal experts said the SEC's decision to make Shipchandler, 41, the regional director is likely a sign that the agency's leadership wants its Texas enforcement division to focus more on fraudulent activity by businesses and individuals and less on technical violations of federal securities laws.

Critics might wonder how forcefully he might do so given the relationships he developed at Bracewell & Giuliani and where he might seek to go after his tenure at the SEC is over.

For background and related class concepts:

- Wikipedia: Revolving Door.
- Open Secrets: Top Industries.
- Rolling Stone: Revolving Door: From Top Futures Regulator to Top Futures Lobbyist.
- Bracewell & Guiliani.
- Wikipedia: Regulatory Capture.
- Wikipedia: Bracewell & Guiliani.

From the NYT: Telecom Investor Named to Be F.C.C. Chairman

A recurrent theme in this class is elite control of governing institutions. We are said to be a democracy and that rule rests with the people, but we are in fact a democratic republic. This means that the preferences of the population are filtered through a variety of institutions - legislative, executive and judicial - established in the Constitution.

What really matters is who controls those institutions.

Quite often these people are those who have the wealth and organizational ability to help supporters get elected to office, and then have the ability to control the institutions that set the rules that govern what they do. We use a variety of terms to refer to this: agency capture, the revolving door and the iron triangle among them. All refer to the relationships that begin to develop around the different institutions, organizations and people who have an interest in and influence over, some matter of public policy.

The concern is that these relationships - and the fact that private interests are part of these networks - makes it likely that private interests will win out over public interests in how these policies are set and implemented. On the other hand, these relationships ensure that participants in the public policy process have expertise in that field. The trick is balancing these two.

Here's a recent story from the New York Times that highlights this tendency in the communications industry. A well connected telecommunications investor and lobbyist - Tom Wheeler - has been named the head of the FCC - the regulatory agency that sets rules for the industry:

Mr. Wheeler served from 1992 to 2004 as the chief executive of the Cellular Telecommunications and Internet Association, the cellphone industry trade group, and from 1979 to 1984 was chief executive of the National Cable Television Association. That has led some telecommunications watchdog groups to worry that he might favor those businesses over consumers.

And:

Once he takes office, Mr. Wheeler, 67, will be under pressure not only to demonstrate that he understands rapidly changing technologies, but also to make clear that his previous work as a top lobbyist for the cellphone and cable television industries will not prejudice his F.C.C. decision-making.

Mr. Wheeler will have to confront several issues almost immediately upon Senate confirmation and being sworn in. The commission is preparing for a complicated auction next year of bands of spectrum — the electromagnetic airwaves over which television, radio and cellphone signals travel.

. . . Mr. Wheeler and the commission will also have to decide the extent to which various companies will be eligible to bid for the bands of spectrum. Some consumer advocates say they believe that AT&T and Verizon already control too much of the wireless phone market — roughly 70 percent — and should not be allowed to lock up more spectrum.

The companies, some members of Congress and others, however, want the F.C.C. to maximize revenue from the spectrum auction — which would mean allowing AT&T and Verizon to buy as much as they want. 

Since this is topical - we might want to try to unpack the relationships that exist in the telecommunications sectors and the Federal Communications Commission. It'll give us an idea about how political influence really flows on the national level.

The revolving door in the financial sector

For our look at the bureaucracy today.

An ongoing complaint about bureaucratic agencies - especially regulatory agencies - is that they are often staffed with individuals who have a background in the industry being regulated. This has the advantage of using people who have an understanding of the industry, and know where the bodies are buried, but it also creates an opportunity for a conflict of interest.

The appointees might be sympathetic towards the industry and not be overly harsh in its regulations. They also might expect to reenter the private side of the industry when their terms are up, so they want to keep their employment prospects open. No one will hire them if they are seen as enemies.

Here's the latest salvo on this front. It involves a recent Obama nominee:

Obsess all you’d like about President Obama’s nomination of Mary Jo White to head the Securities and Exchange Commission. Who heads the agency is vital, but important fights in Washington are happening in quiet rooms, away from the media gaze.

After a widely praised stint as a tough United States attorney, Ms. White spent the last decade serving so many large banks and investment houses that by the time she finishes recusing herself from regulatory matters, she may be down to overseeing First Wauwatosa Securities.

Ms. White maintains she can run the S.E.C. without fear or favor. But the focus shouldn’t be limited to whether she can be effective. For lobbyists, the real targets are regulators and staff members for lawmakers.

Ms. White, at least, will have to sit for Congressional testimony, answer occasional questions from the media and fill out disclosure forms. Staff members, however, work in untroubled anonymity for the most part. So, while everyone knows there’s a revolving door — so naïve to even bring it up! — few realize just how fluidly it spins.

This is highly recommended reading.

From Texas Tribune: Regulators Face Criticism Over Earthquake Monitoring

The Texas Tribune points out that increased earthquake activity has led to investigations in other states, but not in Texas.

StateImpact Texas wonders if this is because regulatory agencies in the state are controlled by the oil and gas industry.

RegBlog

I justr became aware of this website. Should be useful for our look at the executive branch and regulatory agencies. Its affilitated with the university of Pennsylvania's Program on Regulation.

One area of interest: Romney's regulatory proposals.

A new rule by the FDA

From the NYT:

Farmers and ranchers will for the first time need a prescription from a veterinarian before using antibiotics in farm animals, in hopes that more judicious use of the drugs will reduce the tens of thousands of human deaths that result each year from the drugs’ overuse.

The Food and Drug Administration announced the new rule Wednesday after trying for more than 35 years to stop farmers and ranchers from feeding antibiotics to cattle, pigs, chickens and other animals simply to help the animals grow larger. Using small amounts of antibiotics over long periods of time leads to the growth of bacteria that are resistant to the drugs’ effects, endangering humans who become infected but cannot be treated with routine antibiotic therapy.

At least two million people are sickened and an estimated 99,000 die every year from hospital-acquired infections, the majority of which result from such resistant strains. It is unknown how many of these illnesses and deaths result from agricultural uses of antibiotics, but about 80 percent of antibiotics sold in the United States are used in animals.

From the NYT: N.T.S.B. Suggests Safety Steps After Deadly Crash at Reno Air Show

This is a follow up to previous post and it explains where regulatory rules come from:

Air race pilots should take their modified aircraft on dry runs before participating in certain types of competitions, and should possibly wear flight suits to help them withstand high gravitational forces, according to the National Transportation Safety Board. The recommendations were among seven the board offered Tuesday during a news conference in Reno in the wake of a Sept. 16 crash at the Reno National Championship Air Races that killed 11 people and seriously injured more than 70 spectators.

“We are not here to put a stop to air racing,” said Deborah Hersman, the N.T.S.B. chairman. “We are here to make it safer.

Where the White House and the FDA Disagree

The NYT has a great story highlighting a recent disagreement between the Food and Drug Administration and the Obama Administration over whether movie theater would have to post how many calories a box of popcorn has. The FDA though of it as a policy health issues - as it is supposed to - while the administration thought about the political fallout.

They provide a list of other areas where they disagree.

This is a great was to get a handle on the limits of presidential power over the bureaucracy, especially when the policy goals of the latter conflict with the political needs of the former.

Three Hill stories about the FCC

2302's should read these since they touch on a critical independent executive agency - one that is commonly argued to be captured by the industry it is meant to regulate. 2301s should read these for what they tell us about federalism - what policies the national government claims it has authority to regulate. Few claims are made that it is unconstitutional for them to regulate communications since it seems by its nature to be an interstate activity. 2301s might also be attentive to the agency capture angle, since these relationships are driven by industries and the lobbyists who represent them. Are FCC commissioners truly independent and attentive to the needs of the general public, or are they placed on the commission to represent the needs of the industry?

1 - LightSquared: FCC's planned block will violate our 'constitutional rights': The FCC's efforts to resolve a conflict between LightSquared and companies that use GPS is getting nasty. More from PCWorld.

2 - FCC commissioner blasts his agency for over-regulation: This is self explanatory, but fits within the subject matter of previous posts on the overall impact of regulations and whether independent regulatory agencies are too zealous in their approach to what they do. It is worth pointing out that the commissioner in question was appointed by George W Bush and shares the general disposition to regulations that Republicans tend to have.

3 - Republican pushes FCC for details on Google 'Wi-Spy': The FCC has been investigating the fallout from the personal data Google collected and published while creating its Street View feature. A member of Congress wants to see the report.

For further info:
- The FCC Website
- The FCC Wikipedia site

Some random topical posts on bureaucratic rulemaking . . .

For 2302 (primarily) a few links to recent stories regarding the federal bureaucracy and its rule-making authority.

- First, to patch up an omission in the notes, here is a link to the Office of Information and Regulatory Affairs, which is part of the White House's Office of Management and Budget and "was created by Congress with the enactment of the Paperwork Reduction Act of 1980 (PRA). OIRA carries out several important functions, including reviewing Federal regulations, reducing paperwork burdens, and overseeing policies relating to privacy, information quality, and statistical programs.'

- From the National Review, criticism of the newly created Consumer Financial Protection Bureau, which was created in the Dodd-Frank bill which itself was a response to the 2008 financial crash and the hunch by many that the crash was made possible by the removal of regulations that minimized the incentives for banks to make risky investments with deposits. The author reports on a conference which discussed whether the agency had sufficient checks on its activities, but seemed to accept the aide that reasonable regulations were needed. He also points out that Madison was concerned about the negative impact regulatory uncertainty can created in the private sector. The article also touches on the problems of regulatory capture and the revolving door.
-- The Rule of Law and the Administrative State.
-- Congress vs. Agencies: Balancing Checks and Efficiency: Gridlock, Organized Interests, and Regulatory Capture.
-- Federalist #62.

- From Reuters, comments on the difficulty of implementing the Dodd-Frank requirements that the derivative market be regulated. 60 regulations are required to be established by the Commodity Futures Trading Commission, and they must be justified by cost-benefit analyses, but this is apparently much more difficult to achieve than one might think.
-- Cost-Benefit Analysis and the Commodity Futures Trading Commission.

- From the Economist, more criticism of Dodd-Frank, and the general trend towards over-regulation and what impact it has on the economy.

- From the Huffington Post, a report on the ability of industry lobbyists to delay the implementation of the "silica rule" which is being considered by the Labor Department: The rule "would limit the amount of breathable silica dust to which workers in the construction and mining industries are exposed. Crystalline silica dust is found in sand and granite, and it has been known for decades to lead to the respiratory disease known as silicosis. Although the regulations would strengthen protections for workers, they're expected to raise costs for businesses that mine or build with materials involving silica."
- Worker Safety Rule Under Review at OIRA for Over a Year: A Tale of Rulemaking Delay.
- Click here for the status of the review.

Independent Payment Advisory Board repealed in the House Subcommittee

A bill repealing the Independent Payment Advisory Board, which was designed to curb growth in Medicare spending passed the Energy and Commerce Health subcommittee in a 17-5 vote.

Story in The Hill.

A some random stories regarding the federal bureaucracy

Three stories for 2302 students to chew on:

1 - The Food and Drug Administration eases rules in order to deal with the shortages of two cancer drugs. Key part of the story:

There is a years-long backlog of applications for new generic drugs at the F.D.A. because the government does not have the money to hire enough reviewers to analyze the applications or inspectors to visit the facilities, many of them abroad. The generic drug industry tired of waiting for Congress to fully finance the F.D.A.’s generic drug office and this year proposed providing the agency with $299 million in annual fees to finance the review process.


- The Food and Drug Administration (Wikipedia)
- From Wikipedia: History of the Food and Drug Administration.
2 - The Securities and Exchange Commission is worried that energy companies are over estimating their natural gas reserves. Recent rules changes loosened the process companies used to claim how much natural gas they were able tap into. Since these affect the value of a company's stock, there is an incentive to over estimate. Some would like those rules reversed.

- The Securities and Exchange Commission (Wikipedia)
- History.

3 - Is Obama preparing midnight regulations in case he is defeated in November? These would be ways to preserve programs he has passed while in office. Somethimes these are more difficult to rescind than you might think.

4 - The Economists argues that Ameica is both over and poorly regulated:

America needs a smarter approach to regulation. First, all important rules should be subjected to cost-benefit analysis by an independent watchdog. The results should be made public before the rule is enacted. All big regulations should also come with sunset clauses, so that they expire after, say, ten years unless Congress explicitly re-authorises them.

More important, rules need to be much simpler. When regulators try to write an all-purpose instruction manual, the truly important dos and don’ts are lost in an ocean of verbiage. Far better to lay down broad goals and prescribe only what is strictly necessary to achieve them. Legislators should pass simple rules, and leave regulators to enforce them.

The FDA and counterfeit drugs

To prep 2302 for our exploration of the executive branch next week, a radio story about the Food and Drug Administration's ability - given resources allocated to it - to regulate the sale of drugs, including the ability to detect a remove from the market - counterfeit drug. I'm not absolutely certain, but FDA funding is likely discretionary, so it can be cut at any time. The question is whether doing so is beneficial.

Congress to Investigate Freddie Mac

From NPR:

Several U.S. lawmakers and prominent economists on Monday said Congress and the White House should end a financial conflict of interest at the taxpayer-owned mortgage company Freddie Mac.

Freddie Mac, which has a public mission to help make home ownership affordable, also has placed multibillion-dollar bets against American homeowners being able to refinance to cheaper mortgages. NPR, in partnership with ProPublica, an independent, nonprofit newsroom, first revealed Freddie's bets on NPR during Monday's Morning Edition.

Later in the day, Sen. Bob Casey, D-Pa., expressed "outrage" in a letter to President Obama, calling on the White House to "to put an end to these practices."

Freddie's regulator, the Federal Housing Finance Agency (FHFA), late Monday issued a statement saying that last year, it began assessing Freddie Mac's controversial investment strategy. In December, "Freddie Mac agreed that these transactions would not resume pending completion of the examination work," it said.

Oversight on the way....

- More from ABC.
- From Pro Publica: Freddie Mac Bets Against American Homeowners.

Judge overturns SEC ruling

2301's should take note of this story. We're covering interest groups and the related concept of agency capture. Sectors of the economy are often accused of "capturing" the regulatory agencies that oversee them by working to have people affiliated with that sector placed at the head of those agencies. The assumption is that once in power, those people will use the power of the regulatory agencies to promote the interests of the economic sector, not the general public.

The Securities and Exchange Commission is commonly accused of doing the biding of the financial sector. This story not only explains how - punishing financial companies with fines while allowing them to not admit to doing anything wrong - but how an independent judiciary can limit this practice.

Consider this to also illustrate the checks and balances and the importance of independent judiciaries. Would an elected judiciary also be able to do this?

Do Regulations Kill Jobs?

The term "regulations" means health care reform and financial re-regulation.

CNN says no.

Update: The head of the Consumer Products Safety Commission defends regulation.

Adminstering Dodd-Frank

The NYT points out that while financial regulation laws were passed last year, the agencies it established have yet to be staffed. This has the obvious consequence:

Without strong leaders at the top of the nation’s financial regulatory agencies, the Dodd-Frank financial reform doesn’t have a chance. Whether it is protecting consumers against abusive lending, reforming the mortgage market or reining in too-big-to-fail banks, all require tough and experienced regulators.

Too many of these jobs are vacant, or soon will be, or are filled by caretakers. So it was a relief last week when President Obama said he had decided on a well-qualified nominee to be the new chairman for the Federal Deposit Insurance Corporation and would make other nominations soon. The White House needs to move quickly and be prepared to fight.

Much of the blame for the delays lies with Republican lawmakers who have consistently opposed qualified candidates. In the case of the new Consumer Financial Protection Bureau, they have vowed to obstruct any nominee unless Democrats first agree to gut the agency’s powers. Until now, the administration hasn’t pushed back.

This points out a secondary way that legislation can be curtailed. If the opposition lacks the strength to stop a law from being passed, they may be able to use obstruction as a way to ensure that the law is not implemented as originally intended.