As reported in the WSJ , Roll Call and Forbes, on Tuesday, House Republicans sent a letter to federal agencies requesting that they not engage in any “midnight” rulemaking — adoption of new rules before the new administration is sworn in. The letter, signed by the House Majority Leader and the House Republican committee chairs, cautions federal agencies against any rulemaking during the final months of the Obama administration:
“Earlier this year, President Obama’s Chief of Staff stated that the Administration will ‘do audacious executive action throughout the course of the rest of the year.’ As you are aware, such action often involves the exercise of substantial policymaking discretion and could have far-reaching impacts on the American people and economy. Considering these potential consequences, we write to caution you against finalizing pending rules or regulations in the Administration’s last days. By refraining from acting with undue haste, you will ensure that agency staff may fully assess the costs and benefits of rules, making it less likely that unintended consequences will harm consumers and businesses. Moreover, such forbearance is necessary to afford the recently elected Administration and Congress the opportunity to review and give direction concerning pending rulemakings. Should you ignore this counsel, please be aware that we will work with our colleagues to ensure that Congress scrutinizes your actions and, if appropriate, overturns them pursuant to the Congressional Review Act.”
In support of their position, the House Republicans cited a January 20, 2009, letter from President Obama’s Chief of Staff requesting that the heads of executive departments and agencies refrain from finalizing new rules, writing that “[i]t is important that [the President’s] appointees and designees have the opportunity to review and approve any new or pending regulations.” (January 20, 2009? Wasn’t that inauguration day?)
The WSJ reported that, at a press conference earlier on Tuesday, the Majority Leader also observed that, House Democrats made a similar request following President Obama’s election, but no date was specified. The Majority Leader also noted that “the Congressional Review Act allows Congress to ‘come back and vote…out’ any ‘midnight regulation’ federal agencies try to finalize in the administration’s final weeks. The House also will vote later this week on a bill to prevent last-minute regulations, though the White House has promised to veto that bill.”
Similarly, at an SEC oversight hearing on Tuesday during which Chair White testified, the opening statement of Jeb Hensarling, Chair of the House Financial Services Committee, included the same request:
“Finally, Chair White – and this is most important – whenever there is a transfer of power from one presidential administration to another, there is a temptation for federal agencies to rush pending rulemakings to completion, as a way of cementing the policy priorities of the outgoing administration. But this type of “midnight rulemaking” is neither conducive to sound policy nor consistent with principles of democratic accountability. As there are currently two vacancies at the Commission, absent an emergency and given your current reputation and legacy, I would strongly urge you to respect the results of last week’s election and resist the temptation to finalize any regulations, including Dodd-Frank Title VII regulations, in deference to the right of the incoming administration to set its own priorities upon taking office in January.”
According to the WSJ, White replied that “‘I do intend to carry out the agenda I outlined… as much as I can.’” The WSJ also reports that White House Press Secretary Josh Earnest “stressed last week that the administration intended to continue exercising its authority until it is officially out of office. ‘President Obama will be President of the United States through January 20th and he will exercise all of the authorities of that office until then,’ he said.”
While it would be surprising if the SEC were to introduce new rule proposals at this point, whether it takes any further action on any pending rulemakings — such as compensation clawbacks, pay-versus-performance or hedging disclosures, all of which were proposed in 2015, but have not yet been adopted, or even universal proxy rules, which were proposed just recently (see, e.g., this PubCo post) — during the Obama Administration’s last months remains to be seen.
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