Comments? Who Cares?
The comment process is written into law. The Administrative Procedures Act ("APA") requires federal agencies to solicit and consider public comment before issuing regulations. At Compliance Action, we like to think of the APA as the government's regulatory compliance burden. It is a process that a federal agency must follow before issuing rules.
There are exceptions - such as emergencies, statutory mandates that override the comment requirement, or a need to issue a rule swiftly in the public interest. But that is pretty much the extent of any exceptions. For all other situations, the federal agency has to comply with the APA before issuing a rule.
The APA is well-intended. It is designed to keep government in check. It is designed to ensure that those affected by government action have some say in the process.
Unfortunately for how things really work, having a say in the process involves effort and too many affected members of the public are not willing to do the work. When this happens, the result is a rule that may be less than desirable, or a rule that actually interferes with business. Worse yet, it can be a rule that trips over itself so that the goal is thwarted. But it isn't fair to blame the flaws in the rule on the rule writers.
Without comments, the rule writers have limited resources. They have the statute which mandates certain results. In the case of CRA, this mandate is ambitious but vague. The federal bank regulatory agencies must take steps to evaluate financial institutions' efforts to help meet the credit needs of the low- and moderate-income areas in their markets. It is left to the rule writers to define what "help meet" means, along with all the other measurements.
In the case of CRA, the rule writers also have to decide how they will measure performance. The CRA regulation is really a performance measurement scheme rather than a mandate to do or not to do certain things. When the CRA regulations were originally written, there was absolutely nothing to provide a blueprint for the writers. They had to make it all up, using their best judgment.
Since the original CRA regulation, the regulators have had some experience with their efforts to enforce or implement the act. In short, they have had experience in assessing the performance of their regulated institutions. And they know how difficult it is. Asking examiners to make value judgments on the quality of commitment and level of effort was not manageable. So the regulation under which financial institutions now do business uses a counting and quantifying approach.
But quantification has its problems also. It leaves financial institutions with limited choices about the best approach to community reinvestment. Instead, they must focus on meeting the three tests. Many financial institutions have struggled with this approach to CRA performance measurement. Many institutions are not happy with the current regulation and would like to see some changes.
So what happened? Why will there be no changes? For starters, there were almost no comments supporting change. But there were a lot of comments opposing change.
The institutions that have difficulties meeting the investment test failed to make their case. They failed to produce the information and arguments that would support relief of the investment test on smaller institutions. They failed to raise the long-term nature of community development, making it difficult to meet an annual measurement.
But the advocates wasted no time. They commented. And they got what they asked for.
Copyright © 2004 Compliance Action. Originally appeared in Compliance Action, Vol. 9, No. 8, 8/04
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