Summer Reading: Agency Overreach

The Taxpayers Protection Alliance (TPA) is eagerly anticipating the end of summer. The weather in Washington, D.C. matches the city’s nickname—it has been, in a word, swampy. But as August gives way to September, TPA’s wish for cooler weather is soon to be fulfilled.

As fall nears, TPA is also wishing away another type of swampiness: a decrease in swampy governance by the administrative agencies that pockmark the urban landscape of the nation’s capital. The Biden administration was defined by regulatory overreach—the unilateral exercise of vast powers, often essentially legislative in nature, that, if carried to completion, would have significantly damaged the American economy. Many of these Biden-era bureaucratic misadventures often lacked anything resembling a congressional mandate. Although the foul brews cooked up by alphabet-soup agencies often failed to capture the public’s attention as other, sexier political and cultural conflicts did, President Donald Trump’s electoral mandate to be unlike his predecessor doubtlessly requires his administration to repudiate the overreaching technocracy of the Biden years.

Egregious offenders have included the Securities and Exchange Commission (SEC), Consumer Financial Protection Bureau (CFPB), and the Federal Trade Commission (FTC). Since January, each one has chosen a separate course of reform.

The Securities and Exchange Commission

The SEC has undertaken a traditional and direct program of reform under its Trump-appointed chairman, Paul Atkins. It has simply reversed the policies of the Biden SEC, with respect both to substantial policy and to its modus operandi.

In a recent interview with TPA, Jennifer Schulp, the director of financial regulation studies at the Cato Institute’s Center for Monetary and Financial Alternatives, summed up the progress underway. “It’s always a little bit scary when we hear that the SEC is being busy, but I don’t think that there’s a good reason to be scared at the moment,” Schulp said. “This SEC has taken…a 180 from where the Biden administration was.”

“If you could…characterize the Biden administration’s SEC positioning in two ways,” Schulp continued. “One, it was very suspicious of any sort of innovation, which is what led towards its very hostile stance towards crypto. And it was very interested in…pushing particular agendas through the securities laws, which is how we ended up with things like the climate-risk disclosure rule…controlling companies’ behaviors through the securities laws. The Trump administration’s SEC is completely the opposite of that on both counts.”

Indeed, as Schulp noted, Chairman Atkins has made explicit his preference for free markets and free innovation, and the Trump SEC has abandoned many of its predecessor’s proposals. Financial markets—traditional and novel alike—do not differ from other markets insofar as they function best when subjected to market forces and freed from the distortive bonds of regulation.

The Consumer Financial Protection Bureau

The CFPB’s journey back from Biden-era overreach has proceeded over far more ambitious ground. TPA’s position on the agency was captured best by the headline of a January op-ed in National Review: “Abolish the Consumer Financial Protection Bureau.” This elimination would ordinarily be done by Congress, which established the CFPB, but the Trump administration has committed itself to substantially shuttering the agency’s operations unilaterally.

Much of the CFPB’s work has simply halted. Many employees have found their contracts terminated, and agency contracts have been cancelled.

“So far this year, the CFPB has dropped at least 22 pending enforcement actions against companies it had accused of financial wrongdoing, according to a recent analysis by consumer groups,” U.S. News & World Report noted this week. “It has also reversed multiple settlements where companies had already agreed to refund affected consumers.”

For example, the CFPB in March terminated its foolish pursuit of Zelle, brought in December by lame-duck Biden officials.  As the Competitive Enterprise Institute’s Iain Murray argued, “the Bureau was punishing banks for offering a service that scammers happened to use, which was like punishing banks because a scammer persuaded someone to write a check.”

Murray continued:

With good fortune, this will be the last time financial agencies try to use the philosophy behind Operation Choke Point, which (charitably) was that if fraudsters abuse banking services, regulators should go after the banks to stop them. Even if the aim was somewhat noble (and there is plenty of evidence otherwise), the result was vast amounts of collateral damage as legitimate industries and customers found themselves cut off from banking services.

In this case, the likely result of regulatory action would have been less responsiveness to customer demand, less innovation, and a banking sector increasingly outflanked by the nonbank sector in providing customers with what they need.

The stultification of the CFPB raises a difficult question for constitutionalists and conservatives. On the one hand, the recent retreats from abuse and overreach by an agency that ought not to exist, and whose (few) legitimate activities are largely redundant to those of other federal agencies, foment a libertarian joy in the hearts of free marketeers. On the other, the CFPB was made by Congress and charged with statutory duties. In a republican nation, chief executives who flout or outright contravene the legislative branch—the organ of the people and the custodians of the res publica—are anathema. Moreover, unilateral attempts to disband the CFPB leave in place the architecture needed for a Democratic administration to revive and reinvigorate the agency.

The resolution to this dissonance is obvious. Congress may reverse its error in establishing the CFPB—whenever it wishes. Some legislators seem intent on relegating the legislature to the position of a passive spectator, a vestigial organ of the American system. Yet those who hold office in the first branch of the American government are—and ought to be—the elected officials that determine the federal government’s policy.  As TPA wrote in National Review, “For its blunders and for the sake of sensible economic regulation and the American constitutional order, the CFPB deserves to be terminated”—and terminated by Congress.

The Federal Trade Commission

This Summer Reading has progressed from unqualified praise to qualified praise—and arrives now at vituperation. The Trump FTC has carried forward the myopia of Biden-era antitrust officials. More is shared by Lina Khan and Mark Meador than either of the major parties would care to admit.

TPA has noted these incongruent consistencies between the Biden and Trump antitrusters:

Fresh off four years of standing athwart Khan and Kanter, some might find it odd that conservatives have begun mimicking their erstwhile nemeses. Indeed, Trump officials have begun to borrow talking points from their Democratic predecessors. Inexplicably, the Trump FTC and DOJ chose to retain the Biden-era joint merger guidelines. That guidance, breaking with decades-old policies, aimed to subject more mergers and acquisitions to the government’s veto.

FTC Chair Andrew Ferguson justified the capitulation to Khan and Kanter’s arch-progressive guidelines as a boon for regulatory “stability,” arguing that “The wholesale rescission and reworking of guidelines is time consuming and expensive.” This resembles arguing against putting out a recently ignited fire that is burning down a beautiful old home. Dousing the flames and rebuilding would certainly require time, money, and manpower, yet it remains nonetheless preferable to allowing the blaze to continue. If the FTC seeks stability, it should pivot to the proven, economically sound M&A approach that obtained for decades until renegade progressive activists upended it less than 18 months past.

Moreover, Ferguson kept the Biden-era premerger notification rules, wrapping regulatory red tape around every attempt at M&A—not just the less than 2 percent (as of 2021) that attract additional scrutiny.

In another piece, published this month, TPA put it thus:

As President Donald Trump’s appointees at the Department of Justice (DOJ) and Federal Trade Commission (FTC) unveil the theories that will guide their antitrust enforcement, a similar question arises. In a speech delivered at the University of Notre Dame Law School in late April, Assistant Attorney General for the Antitrust Division Abigail Slater outlined “America First Antitrust”, followed days later by FTC commissioner Mark Meador’s manifesto, a paper called “Antitrust for the Conservative.” These public servants purport to be conservatives. In fact, they claim to have recovered an older, truer, aboriginal breed of economic conservativism, dating to times before the movement’s colonization by economists and—mon Dieu!—libertarians. However, upon review of their principles and pronouncements—and their redefinitions of the role and function of economic policy—few planks of genuine American conservatism remain.

This new “conservatism,” while not exactly progressivism, is still a recognizable cousin of the left-wing antitrust theories that prevailed during the Biden administration. Both seek to expand the remit of antitrust enforcers from a narrow one, focused on combating economically anticompetitive behaviors, into something much broader: using antitrust to centrally plan markets to further the planner’s political, social, and economic goals.

Meador writes, “Even if one is to say that improved outcomes for consumers necessarily includes freedom from oppressive economic powers and the political harms [emphasis added] they may inflict, this still makes consumer welfare the ultimate end of competition.” He further labels big business “a threat to democracy.” “Big is bad,” writes Meador, employing a phrase in earnest that, until recently, conservatives considered nothing more than a shorthand for the things wrong with Biden’s radical enforcers. Likewise, Slater’s critique of today’s regulatory regime and economy springs from a dubious account of wealth distribution and manufacturing in modern America.  The economic pie may be growing, Slater admits, but all this “begs the question [sic] as to the size of the slice that each community in our society receives.” In this telling, which would not seem out of place among Bernie Sanders staffers, free trade, immigration, and lax antitrust enforcement have vitiated manufacturing and eroded the American dream. Such catchphrases as “neoliberalism” and “globalization” and “the Washington Consensus” serve as sinister-sounding synonyms for Americans’ right to contract and barter freely with one another and with foreigners. The remedy, says Slater, is state control of markets. Whether propounded by progressives or “conservatives,” this understanding fails doubly, like that of a 13th-century physician unsheathing a bloodletting knife to rebalance the patient’s humours: the diagnosis is faulty, and the prescription inapt.

President Trump has execrated the European Union’s competition-policy foibles, which disadvantage American firms and endanger the fundamentals and foundation of the free and open internet. Nonetheless, his FTC and DOJ have embraced a Europe-like policy, particularly with respect to the technology industry. The left hand seems ignorant of what is being done by the right. The Trump administration’s repudiation of the Biden legacy cannot reach completion until it repudiates—root and branch—the Biden administration’s bid to micromanage the American economy and American innovation.