Risk & Compliance

Regulatory Relief on the Horizon?

President Obama's executive order on regulatory reform meets with cautious approval from business groups.
Alix StuartJanuary 21, 2011

Last week President Obama issued an executive order that sounds like a dream come true for some companies. In it, he called for an across-the-board regulatory rollback, directing all federal agencies to form a plan for regularly reviewing and culling their current rules.

The goal, as he explained in a concurrent editorial in The Wall Street Journal, is to modernize the federal government’s regulatory system and “remove outdated regulations that stifle job creation and make our economy less competitive,” along with “absurd and unnecessary paperwork requirements that waste time and money.” The effort is focused particularly on small companies, which Obama noted create most new jobs in the country.

Among the examples of rules that could be or have been modified, Obama noted a recent reversal of a Food and Drug Administration rule requiring saccharin to be treated like hazardous waste, as well as a new unified set of fuel-emissions rules for automakers.

But there are no such specifics in the executive order itself. “No one knows what it means,” says Stephen Ryan, head of the government strategies practice group at McDermott, Will & Emery. “Clearly, the Administration has a game plan, but they haven’t made that public yet.” There’s also some question as to whether the order covers major “independent agency” rule makers such as the Securities and Exchange Commission and the Treasury Department, which control some of the thorniest business rules, including the Dodd-Frank Act.

Regardless of that uncertainty, business groups are cautiously optimistic about the President’s order. The U.S. Chamber of Commerce welcomed it as “a positive first step,” adding that “fundamental reform of our broken regulatory system” is necessary. (Obama is scheduled to speak to the chamber on February 7; many see his order as a step to ease tensions with the business lobbying group.)

The American Banking Assn. responded to the order with a wish list in the form of a letter to the President. “All banks and their services to their customers are hurt by overregulation,” said ABA president Gov. Frank Keating in the letter, with community banks among the hardest hit. The letter lists six specific requests for regulators to address, including maintaining or lowering banks’ required capital ratios and allowing more flexibility when it comes to commercial real estate lending.

Others point out that there are plenty of modifications to workplace and environmental regulations that would be a boon to small-business owners. “We’re glad he’s focusing on the regulatory burden and particularly for small businesses, since they are disproportionately affected by regulation,” says Susan Eckerly, senior vice president, federal public policy, at the National Federation of Independent Business.

Many of the rules the NFIB would like to see changed originate from the Occupational Safety and Health Administration and the Environmental Protection Agency, says Eckerly. OSHA, for example, is considering adding the category of “musculoskeletal disorders” to a report that companies must file about injuries at work, a step that would ask business owners to make judgments about difficult-to-diagnose problems that are often hard even for doctors to pinpoint. OSHA is also looking at formalizing a workplace “injury and illness prevention” program that could be a “paperwork nightmare,” she says.

Other “problem” regulations include the EPA’s efforts to reduce acceptable ozone and dust levels in the air, says Eckerly, and to require specialized (and expensive) training for lead removal.

The executive order gives federal agencies 120 days to submit their preliminary plans to the White House’s Office of Information and Regulatory Affairs, which is headed by Cass Sunstein, a well-regarded legal scholar who has taught at both the University of Chicago and Harvard law schools. According to media reports, Sunstein will appear before the House Energy and Commerce Oversight Subcommittee next week to field questions about the order.