We’re All Rulemakers Now

Running a government must be like walking a tightrope, always balancing the need to dominate with the need to make constituents feel like they have the power. Fail at the first and you’ll never have the power to get anything done. Fail at the second and you’ll be out of power before you can get anything done. Either way, you fall off the rope. We like to think of our political appointees (and they’re all appointed, just some through general elections) as leaders. But really, they’re more like directors. Instead of leading us down a path, they tell us what paths we can go down and which ones we can’t. They make rules and we abide by them. Good governments are made up of politicians who basically follow the same rules as they make for their constituents. Whether they play by the same rules or not, people in government make the rules. Knowing this, I’m always suspicious when I see government acting like they want to include the rest of us in the rulemaking process. For instance, last week, the FDIC announced its new “Open Door” policy for regulatory reform rulemaking, something the agency says will make it easier for the public to give input and track the rulemaking process as the agency implements the Dodd-Frank Wall Street Reform and Consumer Protection Act. Well, that’s just great. We couldn’t get politicians on Capitol Hill to listen to the industry because they were busy trying to add pages to the 2,000-page bill before the book slammed shut and got shipped to the White House for the president’s stamp. Now that we have the book on the future of the industry, the FDIC wants to let anyone with an idea come in and tell them how to implement the rules? It’s been a criticism of our government in the past that legislators will pass laws without regard to details like funding, agency oversight or enforcement. Perhaps our elected officials don’t think they were hired or are being compensated for such things. On the other hand, it probably made good sense at one point to put the actual implementation of a new law into the hands of agency workers who, presumably, knew something about the industry they were regulating. I’m not sure that’s as valid today as it was in the past, but our agencies are staffed up and firing a government employee is harder than declaring war in the Middle East, unless you have YouTube support. But I digress… The FDIC says the new policy with allow the public to have a larger role in the process than ever before, “especially being able to participate even before regulatory reform rules are drafted and proposed.” This does go well beyond the comment period we’ve been offered in the past, but is the agency really willing to read and consider every rule an attorney dreams up and sends in? And what about that common man this administration has been bent on attracting since the president launched his first Facebook page? Does the agency really expect Joe Public to send in a rule that will make sense for the implementation of a law like “FrankenDodd,” to steal blatantly from Ann Fulmer? FDIC Chairman Sheila C. Bair calls this a move toward greater transparency. “I think transparency is a significant issue for each step along the way. We owe it to the public to have an open door policy so that people can see for themselves how financial services reform is going to be implemented.” So, it’s possible that when the FDIC says Open Door, what they really mean is something more akin to the big doors on the front of the Smithsonian or Teddy Roosevelt’s home on Long Island. The public is welcomed in and can look around. The press release makes it sound like we can just make up some rules and put them in a stamped envelope and help with the financial reformation. On the surface, a thinking man would have to say this is crazy. But this is the administration that launched and then sponsored a video contest on YouTube to see what citizen could provide the most clever video to explain the site’s purpose. The site appears to be something of an Open Door for about 300 government agencies (yes, we have that many). The United States is a republic, but we act like a democracy whenever we can. In general, I applaud any effort to make our system more open to the people it is supposed to govern. But this self-serve rulemaking seems doomed from the get go. I give the FDIC’s Open Door six months before I expect to see it slam shut. In the meantime, I would love to be copied on any new rules anyone sends the agency’s way. Rick Grant is veteran journalist covering mortgage technology and the financial industry. Follow him on Twitter: @NYRickGrant

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