The Regulatory Week in Review: May 26, 2017

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The Fourth Circuit upholds an injunction on President Trump’s travel ban executive order, the D.C. Circuit hears oral arguments about the constitutionality of the CFPB, and more…

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IN THE NEWS

  • The U.S. Court of Appeals for the Fourth Circuit upheld a lower court’s injunction against President Donald Trump’s travel ban executive order. The Fourth Circuit refused to reinstate the travel ban, which would have temporarily banned the issuance of visas to citizens of six majority-Muslim countries, on the grounds that the ban likely violates the Establishment Clause of the First Amendment because it disfavors a particular religion. The Fourth Circuit’s opinion said that “there is simply too much evidence that” Trump’s executive order “was motivated by religious animus for it to survive any measure of constitutional review.”
  • The U.S. Court of Appeals for the District of Columbia Circuit, sitting en banc, heard oral arguments in a case to determine whether the structure of the Consumer Financial Protection Bureau (CFPB) is constitutional. Challengers argued that the structure of the CFPB, whose director can only be removed by the president for cause, is unconstitutional. In October, a three-judge panel on the D.C. Circuit ruled that the agency’s structure was unconstitutional and held that the agency would need to be restructured to look more like other independent agencies, which are usually run by a group of commissioners.
  • U.S. Secretary of Labor Alexander Acosta wrote that the U.S. Department of Labor’s fiduciary duty rule for financial advisors will not be delayed any further and will take effect on June 9. The rule, issued during the Obama Administration, “requires brokers offering retirement investment advice to act in the best interest of their customers.” Specifically, the rule attempts to prevent brokers from letting customers make expensive investments that end up giving “high commissions or profit-sharing compensation to the brokers.” Acosta acknowledged that the rule is “controversial” and not necessarily compatible with President Trump’s “deregulatory goals,” but he concluded that the Department had “no principled legal basis to change the June 9 date.”
  • The U.S. Court of Appeals for the DC Circuit vacated a Federal Aviation Administration’s 2015 rule requiring individuals to register their unmanned aircraft systems (UAS or drones) that are operated for recreational purposes. This ruling does not affect existing registration requirements for commercial operators. Commercial drone operators expressed disappointment in the ruling, whereas recreational drone enthusiasts believed it to be a “good thing.” The FAA is in the process of reviewing the court’s decision.
  • Vermont Governor Phil Scott vetoed a bill that proposed the legalization of marijuana possession by those 21 and older. Scott justified his veto by arguing that the bill “does not yet adequately address” issues like tracking substance use by drivers, promoting education on substance abuse, maintaining the safety of children, and monitoring the effect of legalizing marijuana on mental health. Scott said he would give the legislature certain “recommended changes” to the bill. These changes, he argued, would provide “a path forward that takes a much more thorough look at what public health, safety and education policies are needed before” he would approve legalization.
  • The U.S. House of Representatives voted to loosen regulations on pesticides. Pesticides currently have to be approved under both the Federal Insecticide Fungicide and Rodenticide Act (FIFRA) and the Clean Water Act (CWA); however, the bill approved by the House would eliminate the need for CWA approval once the EPA has given its approval under FIFRA. U.S. Representative Bob Gibbs (R-Ohio), who sponsored the bill, said that the way pesticides are currently regulated “hurts productivity and efficiency” and “does not add any new environmental protections.” Representative Grace Napolitano (D-Calif.) was concerned “about the impact these pesticides have on the health of our rivers, our streams, especially the drinking water supplies.”
  • The Federal Railroad Administration issued its third delay of an August 2016 rule requiring passenger railroads to develop and implement a system safety program (SPP). An SPP is a program developed and implemented by commuter and intercity passenger railroads to identify and then eliminate or mitigate hazards. The latest stay will delay the rule’s effective date until June 5, 2017.
  • The Federal Emergency Management Agency issued a rule identifying communities where the sale of flood insurance under the National Flood Insurance Program (NFIP) is being scheduled for suspension due to noncompliance with the floodplain management requirements of the program. Federal law prohibits the sale of NFIP flood insurance unless an appropriate public body adopts adequate floodplain management measures with effective enforcement measures. If these communities at risk of suspension adopt and submit the required documentation, they will not be suspended and will continue to be eligible for the sale of the NFIP floodplain insurance.

WHAT WE’RE READING THIS WEEK

  • In an article for the Brookings Institution, Edward Glaeser argues that land use rules are America’s most costly regulations. Using what is known as the MPPC measure, Glaeser finds that “land use controls that limit the growth of such successful cities mean that Americans increasingly live in places that make it easy to build, not in places with higher levels of productivity.” Glaeser suggests a solution to the problem of land use controls: states should allow builders to bypass local land use ordinances where there is not enough affordable housing.
  • Kermit Schoenholtz and Lawrence White argue that the Financial Choice Act, a bill which has been introduced in the U.S. House of Representatives, would reverse much of the regulation adopted after the financial crisis and actually make the financial system less safe. The proposed legislation would cut back on stress tests that gauge large institutions’ ability to weather a financial crisis, eliminate the institutions’ plans for an orderly shutdown in case of a crisis, and remove the temporary financing needed to prevent creditor runs during the process of resolution. The overall result would worsen what Shoenholtz and White view as one of Dodd-Frank’s key faults: the propensity to regulate by legal form rather than economic function, and would thus place additional limitations on the Federal Reserve’s ability to deal with any future financial crisis and imposes constraints on its wider role in setting monetary policy.
  • In a report for the Heritage Foundation, Paul Larkin discusses what he calls an “explosion in the number of occupations subject to a licensing requirement” that occurred in the 20th century, claiming that today professions requiring a license make up “no less than 25 percent of the economy.” Larkin argues that certain jobs for which a license is needed, like barbering, “do not bear even a remote relation to protection of the life, health, and safety of community members.” Ultimately, Larkin believes that requiring licenses “sometimes on pain of criminal liability” for activities with “no risk of harm” is too restrictive.