The landmark Dodd-Frank bill, like the “Affordable Health Care Act” (aka Obamacare), continues to spark controversy. While no one doubts that the financial industry needed some refined regulatory oversight, the escalating compliance requirements of the legislation have imposed real cost burdens on financial institutions, which need profits to recapitalize themselves and extend credit to the badly limping economy.
Frequently the true impact of legislation is not known until the executive branch crafts the implementing regulations. Not surprisingly, the Obama Administration has opted for regulation on steroids. But targeted enterprises are fighting back in court, and the courts are increasingly returning a verdict of “Overreach”.
The Washington Post reports a number of incidents where the courts have smacked down overzealous regulators or may be on the verge of doing so. Interestingly enough, one of the lead attorneys arguing against the government is Eugene Scalia, son of Supreme Court Justice Antonin Scalia. One case involved a regulatory cap on the number of commodities contracts that a trader is allowed to have, despite the absence of any such provision in the actual legislation. Scalia notes that regulators cannot point to good intentions to justify their rules. Under the law, they must take into account both economic impact and the defined scope of the enabling legislation.
“The agencies gave reasons that didn’t add up, contradicted themselves or failed to respond to significant criticisms raised by the public,” Scalia said in an interview. “Any one of those things is going to result in a rule getting thrown out by any court at any time.”
Of course, several favorable court decisions do not a rollback make. Future trends will be determined by the ideological direction of all three branches of government. And voters will play a decisive role in determining that in November.