Week in Review

IN THE NEWS

• U.S. regulators proposed a significant rollback of bank capital rules, one of the biggest since the 2008 financial crisis. The plan lowers what is known as the enhanced supplementary leverage ratio from 5 percent to 3.5 percent for major banks, reducing the capital they must hold against assets. The U.S. Federal Reserve approved the change in a 5-2 vote, aiming to encourage lending and economic growth by easing restrictions. Michelle Bowman, vice chair of the Federal Reserve, called it a vital step for market resilience, but critics warn it could heighten financial risks.
• The U.S. Department of Agriculture announced that it will rescind the 2001 “roadless rule” that prohibits road construction and timber harvest on approximately 59 million acres of national forests. U.S. Secretary of Agriculture Brooke Rollins said that this rule prevented effective wildfire management and restricted economic development in the forestry sector in rural America. Rollins also noted that this rescission would align with President Donald J. Trump’s deregulatory agenda, a goal reflected in many of his executive orders. Several environmental groups opposed this action, emphasizing that the rule had wide public support when it was issued and that rescinding it would increase the risk of wildfires.
• A federal judge blocked the Trump Administration’s cuts to research funding provided by the National Science Foundation (NSF). The decision follows an updated policy released in May capping the reimbursement of indirect costs in federally financial assistance at 15 percent. U.S. District Judge Indira Talwani, who decided the case without a trial in favor the universities and higher education organizations that sued the NSF over the updated policy, said the cap was “invalid, arbitrary and capricious, and contrary to law.” Over the past year, federal judges have also blocked similar funding caps involving the National Institutes of Health, the U.S. Department of Energy, and the U.S. Department of Defense.
• The U.S. Supreme Court ruled that the federal Medicaid statute does not create a private right that can be enforced under the Civil Rights Act of 1871, which permits private citizens to sue state officials if their rights have been deprived. This decision allows a South Carolina executive order that blocks Planned Parenthood from accessing federal Medicaid funding for non-abortion services to remain in place. The Court ruled 6-3 that, although the federal Medicaid statute guarantees that benefit recipients can access any qualified provider, there is no legal right to sue if a state denies access to a certain provider. Justice Neil Gorsuch wrote that the federal Medicaid statute lacks the “clear and unambiguous rights-creating language” necessary to create a legal right to sue. In dissent, Justice Ketanji Brown Jackson argued that the majority’s decision “thwarts Congress’s will” and adopts a “narrow and ahistorical reading” of the Civil Rights Act of 1871.
• A federal judge temporarily blocked President Trump’s executive order ending collective bargaining rights for hundreds of thousands of workers at 21 federal agencies. Six unions filed suit after the Trump Administration issued the order in March, claiming it unconstitutionally prevented federal employees from unionizing under the guise of national security. Judge James Donato of the U.S. District Court for the Northern District of California said that the plaintiffs presented a “serious and plausible First Amendment question” about whether the executive action constituted retaliation for protected speech..
• The U.S. Supreme Court lifted an order from a federal judge that had blocked the government from deporting certain migrants to “third countries,” or nations other than their homeland. The Court ruled 6-3 that, pending the outcome of lower court proceedings, the Department of Homeland Security (DHS) could deport migrants to third countries without robust advance notice and the opportunity to raise objections. In dissent, Justice Sonia Sotomayor argued that this decision undermines principles of due process by “rewarding lawlessness.” Despite this ruling, U.S. District Judge Brian E. Murphy asserted that his order requiring DHS to give the affected migrants a chance to object to deportation with counsel present was still in effect.
• The U.S. Food and Drug Administration (FDA) announced that it will halt new clinical trials that involve sending American citizens’ living cells to “hostile countries” for genetic engineering, if those cells will be infused back into U.S. patients. The decision is intended to prevent exposing Americans’ sensitive genetic data to foreign governments, including China, and is in furtherance of Executive Orders 14117 and 14292, which aim to prevent the exploitation of sensitive biological data by foreign adversaries. The Federal Trade Commission (FTC) is also working with the National Institutes of Health to ensure that no federally funded research is compromised and said that additional enforcement measures could be forthcoming.
• The FTC approved Omnicom Group’s $13.5 billion purchase of the Interpublic Group, a rival advertising agency. The proposed consent order contains a series of rare provisions that would prevent Omnicom from denying media publishers advertising money based on their political or ideological viewpoints, except when customers expressly state otherwise. FTC’s Bureau of Competition Director Daniel Guarnera said that this approval “prevents unlawful coordination that targets specific political or ideological viewpoints while preserving individual advertisers’ ability to choose where their ads are placed.”

WHAT WE’RE READING THIS WEEK

• In an article in the Stanford Law Review, Lina M. Khan, the former chair of the FTC, Samuel Levine, the former director of the FTC’s Bureau of Consumer Protection, and Stephanie Nguyen, the FTC’s former chief technologist, analyzed the FTC’s new approach to data protection. The Khan team first examined the FTC’s previous “notice and choice” model, under which the agency took a hands-off posture on data privacy and mainly tackled deceptive practices by corporations. The Khan team then compared it with the FTC’s new model, under which the FTC plays a more active role in targeting the upstream drivers of data abuse, eradicating “dark patterns” that manipulate customers, and focusing on remedies that aim to deter unfair practices. Khan and her coauthors underscored the importance of institutional upgrades at the FTC, such as the establishment of the FTC’s Office of Technology, which helps advance interdisciplinary research and investigates emerging data privacy issues, including those related to artificial intelligence.
• In a recent Brookings Institution essay, Mark MacCarthy, a nonresident senior fellow at Brookings, argued that the U.S. Department of Justice’s proposal to force Google to share its user search data with competitors, in the wake of last year’s ruling that found Google monopolized the internet search market, is “woefully lacking” in terms of privacy security. MacCarthy argued that, in the face of risks associated with artificial intelligence (AI), the Justice Department should mandate additional requirements, including the de-identification of user data using “”reasonably available techniques” and a ban on attempted re-identification of user data by competitors. Without proper precautions, MacCarthy claimed, AI firms could benefit from the personalized Google user search data of people who “have not necessarily signed up as customers of these AI companies and might have no business relationship at all with them.”
• In a recent essay published by the Brookings Institution, Darrell M. West, a senior fellow at the Center for Technology Innovation, warned of a potential backlash against artificial intelligence due to public concerns over its safety and harm. West noted that tech leaders initially supported regulation but later resisted, citing risks to innovation. He cautioned that unchecked issues such as AI hallucinations and data abuses could mirror social media’s backlash. West urged balanced regulation to ensure transparency and accountability, shaping future AI governance.

EDITOR’S CHOICE

In an essay in The Regulatory Review, Giulia G. Cusenza, a researcher at the University of Udine, examined how U.S. courts address the use of artificial intelligence by government agencies. Cusenza analyzed 44 AI-related court cases since 2010, finding that judicial decisions often rested on procedural grounds—particularly due process violations. She identified six key procedural requirements that courts emphasized, including adequate notice, contestability, and human oversight. These findings aligned with recent executive actions on AI governance and underscored the judiciary’s role in shaping regulatory standards for emerging technologies.