By Amy Harder and Ryan Tracy
President-elect Donald Trump's promise to eliminate regulations
on U.S. businesses will likely take years to fulfill given the
complex steps involved in reversing them and political and legal
challenges from Democratic lawmakers and state attorneys
general.
Mr. Trump has said his administration will take aim at
regulations across industries, and he will be backed by
congressional Republicans eager to undo some of the more
controversial Obama administration initiatives. Big targets include
power-plant regulations and regulatory rules imposed on banks and
financial institutions after the financial crisis of 2008, though
the effort will also reach deep into the federal bureaucracy to
include rules involving labor, telecommunications and health
care.
Mr. Trump has a handful of ways to reach his goal, but they
mostly point to a slow death of attrition for the Obama rules
rather than an immediate elimination. He can opt not to defend
rules currently tied up in court. His federal agencies can write
new rules to justify revoking the ones he wants to eliminate. He
can work with the GOP-controlled Congress to nullify recently
completed regulations and restrict funding to certain parts of
departments as a de facto way to hamstring a rule's force.
In some cases, replacing rules will be as arduous as making them
in the first place, particularly in the financial sector where some
regulations have been issued by multiple agencies. The Volcker
rule, which bans banks from making hedge-fund-like wagers, was
adopted by five financial regulatory agencies. All five agencies
would need to agree to changes for them to apply broadly.
The Trump administration could loosen its enforcement of rules
promulgated under Mr. Obama. That could make a difference where
rules can be interpreted subjectively, such as in the case of the
Volcker rule.
But where explicit rules are on the books, companies would be
taking a risk by not complying, and there is no guarantee that
career government staffers would agree to simply drop their
enforcement actions.
Experience shows the difficulty of unraveling rules. Eight years
ago the incoming Obama team pledged to review rules from the George
W. Bush administration, including many so-called "midnight
regulations" that were pushed through as Mr. Bush was preparing to
leave office.
But of the more than 4,500 proposed or final regulatory actions
cleared by the Bush White House, Mr. Obama repealed just 74 in his
first nine months in office, when rules are most-often revisited,
according to a 2009 presentation by a former official of the White
House Office of Management and Budget. Of those, only 34 were final
rules.
Two Environmental Protection Agency rules are expected to be at
the top of Mr. Trump's target list: One sets the first-ever federal
limits on carbon emissions from power plants and another puts more
bodies of water under federal jurisdiction. Both have been blocked
by different federal courts -- the carbon rule by the Supreme Court
-- until litigation is over.
But conservative and liberal legal experts agree Mr. Trump's EPA
will likely have to go through new rule-making processes to
eliminate both the water and carbon rules. That process could take
two years because a notice of public comment is required while the
EPA justifies its decision from both a policy and legal
perspective.
Similarly, in the financial realm, repealing a rule by the Labor
Department holding brokers to stricter ethical standards when
providing retirement savings advice won't be easy, since it has
already been completed.
The department has the authority to revoke the measure outright,
but like the EPA, it must go through a rule-making process like the
yearslong one that led to its adoption, according to a report by
the law firm Morgan, Lewis & Bockius LLP.
Other options include delaying the measure beyond its April
effective date or issuing guidance that could give firms more
leeway in complying. A legislative effort to scrap the rule may be
the cleanest approach, but it would face strong opposition from
Democrats in the Senate, including Sen. Elizabeth Warren of
Massachusetts.
"There are a lot of options, but none of them are without
complications or difficulties," said Barbara Roper, a proponent of
the so-called fiduciary rule and the head of investor protection at
the Consumer Federation of America.
A 1996 law, the Congressional Review Act, allows Congress to
repeal newer regulations with a lower threshold of Senate votes
than most legislation requires. Once Mr. Trump is inaugurated,
Republicans could use it to pare back rules made since June 2016,
according to a recent estimate by the Congressional Research
Service.
The American Action Forum, a conservative think tank, counts 48
rules that may fall in that category, including worker overtime
regulations and a rule forcing energy companies to disclose
payments made to foreign governments.
Another potential target for invoking the law is an Interior
Department rule, issued last month, cutting methane emissions from
oil and natural-gas wells on federal lands.
The law has been used successfully only once because the sitting
president often vetoes the measure, and Congress typically doesn't
have the needed support -- two-thirds of both chambers -- to
override the veto.
Some rules will be particularly difficult to undo. The Federal
Reserve has issued a litany of regulations impacting large banks,
such as annual "stress tests" of banks' resilience. Those rules
took the Fed years to draft, and could in turn take years to
revise.
Mr. Trump's Fed appointees also wouldn't be able to immediately
order a redraft of the rules. That would need to be approved by a
majority of the Fed's seven-seat governing board, and Mr. Trump may
not have the chance to appoint a majority of Fed governors until
2018.
Mr. Trump's team also wouldn't be able to do away with certain
rules because they are baked into existing law. The 2010 Dodd-Frank
law requires a litany of financial rules, including stress tests at
banks with more than $50 billion in assets and restrictions on
executive compensation.
His appointees could have a greater immediate impact by
softening the enforcement of existing rules. They could take a less
hard-line view when designing banks' stress tests or offer more
leeway meeting compliance deadlines for environmental rules, for
example.
"Even if the rule book doesn't change, the way the rule book is
applied could change," said David Portilla, a partner at Debevoise
& Plimpton LLP. "There will be change, but it's going to be
slower than the initial headlines and not as big as the initial
headlines."
--Andrew Ackerman contributed to this article.
Write to Amy Harder at amy.harder@wsj.com and Ryan Tracy at
ryan.tracy@wsj.com
(END) Dow Jones Newswires
December 14, 2016 05:44 ET (10:44 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.