In a recent speech, CFTC Commissioner Bart Chilton discussed the difficulties litigation poses for regulators. Specifically, he expressed concern that litigation over cost-benefit analyses is elevating the importance of the analyses to the ultimate goal of regulation, not inputs for better rules. He gave an example of a recent CFTC rule on position limits that devoted one-quarter of the release to cost-benefit analysis.
Commissioner Chilton discussed the costs of regulations required by Dodd-Frank, explaining:
My view is that there is not a single benefit to not doing these regulations, but there are unacceptable costs if we don't go forward. Without these rules and regulations, there will be unacceptable costs to consumers, to businesses, to markets, to our economy, and to our country.
He emphasized the importance of including qualitative measures in addition to quantifiable elements when conducting cost-benefit analyses:
In other words, the social costs and benefits need to be taken into account. I by no means want to slow the rulemaking process down in any way but I really believe some of the most important cost-benefit effects of rules go beyond P&L statements, so I'll ask my colleagues to consider painting a more complete picture of what - without these rules - the societal cost might be. Memories fade with time and we need to be mindful of the costs of not doing these things right in the context of the colossal calamity of late '08.
He closed by saying:
The thing is: we had, and have, an economic mess created by lax or non-existent regulations in our financial markets. That isn't a joke or a scary story for millions of people. It is an unfortunate and unforgiving reality. We need to do all we can to appropriately implement the Dodd-Frank rules not only to protect consumers, businesses, and markets alike, but to fuel inject the economic engine of our democracy.
The full text of the speech is available at http://cftc.gov/PressRoom/SpeechesTestimony/opachilton-65.