Chamber president seeks to slow Dodd-Frank, decries ‘regulatory tsunami’

The leader of one of the country’s most politically influential business organizations in a speech today criticized what he called a “regulatory tsunami” in Washington that represents the “biggest single challenge to jobs … and the future of American enterprise.”

Thomas J. Donohue, president and chief executive of the U.S. Chamber of Commerce, cited health care reform and the Dodd-Frank financial regulatory overhaul as two examples of rulemaking run amok. He said that the Wall Street law mandates 259 regulations, suggests another 188 and calls for 63 reports and 59 studies.

“The numbers are changing all the time,” Mr. Donohue said in his annual State of American Business address. “The regulatory tsunami is also about to wash over our capital markets. My grandchildren and your grandchildren will be old and retired before it is all implemented.”

Mr. Donohue said that the chamber, which represents more than 3 million businesses, is most concerned about Dodd-Frank provisions that establish a consumer financial protection bureau, reform the derivatives market and set new proxy-access rules.

He said the consumer agency could limit credit or products to “small businesses and consumers,” while “Main Street end-users” may be prohibited from using derivatives to reduce risk, and unions and “rogue hedge funds” could exploit proxy access.

“If the Congress or the courts or the administration or the regulatory agencies were to address these in a more thoughtful way … we could get to a much better situation in a hurry,” Mr. Donohue said.

He was less pointed in his response to a question about two Securities and Exchange Commission reports due out within the next two weeks — one focusing on whether to establish a self-regulatory organization for advisers and another analyzing the efficacy of a universal fiduciary duty for retail investment advice.

“We think that those are moving in the right direction,” Mr. Donohue said. “If their findings are helpful — and they probably will be in those areas — that would be fine. If not, we’ll challenge them.”

In a follow-up e-mail, Tom Quaadman, vice president of the chamber’s Center for Capital Markets Competitiveness, said that “reasonable investor protections are an important part of efficient and fair capital markets.”

“However, creating opportunities for more litigation is not part of the equation,” Mr. Quaadman said. “We are awaiting the SEC studies and will evaluate the course that they wish to take.”

The chamber will try to affect regulatory outcomes by working with federal agencies when it can. In other circumstances, it will support efforts to limit funding or block implementation, according to Mr. Donohue.

The organization also is seeking to reform the regulatory process.

“This could be done by giving Congress the right to vote up or down on major rules before they take effect — and by strengthening the burden of proof that all agencies would have to demonstrate in court when they are imposing major rules,” Mr. Donohue said.

The chamber likely will find allies for such moves within the new Republican majority in the House and the strengthened GOP minority in the Senate, many of whom benefited from the $32.9 million that the chamber spent on issue advertising during the election last fall.

Another way to slow the regulatory process is to deny funding to the SEC. The agency already is trying to implement Dodd-Frank without the increase in its budget that the law mandates, because Congress failed to approve a new federal budget last fall. The government will continue to operate on fiscal year 2010 funding until at least March 4.

The budget impasse has caused the SEC to institute a hiring freeze, despite needing to bring 800 new staff members aboard to implement Dodd-Frank.

Mr. Donohue said that he isn’t necessarily opposed to giving the SEC the funding it needs to operate.

“We’d rather have the SEC have the smartest, most capable people so that they can deal with these issues,” Mr. Donohue said. “Where we would be working hard on the financial side of this is [denying] money to implement rules … that we think are going to do nothing other than cost the economy jobs.”

Unlike health care reform, however, an outright repeal of Dodd-Frank is not something that even most House Republicans are advocating.