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Board Report: June 13, 2011
We received a letter from the minority members of the Senate Committee on Banking, Housing, and Urban Affairs requesting that we review the economic analysis that the Board performed supporting five Dodd-Frank Act rulemakings. To respond to the members' request, we (1) interviewed more than 30 Board employees who worked on the respective rulemaking teams; (2) reviewed supporting documentation from each of the 5 rulemaking teams; and (3) developed and circulated a questionnaire to determine the qualifications of Board staff who performed economic analysis.
We determined that a number of key statutes provide the Board with rulemaking authority, but generally do not require economic analysis as part of the Board's rulemaking activities. The Dodd-Frank Act did not mandate that an economic or cost-benefit analysis support the five rulemakings, but the Dodd-Frank Act required each of the respective rulemakings to address certain substantive considerations. In addition, the Paperwork Reduction Act and the Regulatory Flexibility Act required the Board to conduct narrowly tailored evaluations of each rulemaking's paperwork burden and effect on small entities, respectively.
We found that the Board routinely reviews economic data to monitor changing economic conditions and conducts the quantitative economic analysis necessary to satisfy statutory requirements and, on a discretionary basis, to support the rulemaking. Further, we determined that the Board generally sought public input for its rulemaking activities and typically reevaluates the effectiveness of its existing regulations every five years. We concluded that the Board generally followed a similar approach for the five rulemakings we reviewed and that the rulemakings we reviewed complied with the Paperwork Reduction Act, the Regulatory Flexibility Act, and applicable Dodd-Frank Act requirements described in our report.
Our analysis yielded the following findings that resulted in recommendations. First, the Board's policy statement on rulemaking procedures had not been recently updated and, although rulemaking staff were cognizant of the Board's rulemaking practices, none of the staff members cited the policy statement. Second, our review of the Federal Register indicated that the notices associated with the respective rulemakings typically provided insight into the general approaches and data used in the economic analysis; however, in some cases, the Board's internal documentation did not clearly outline the work steps underlying Rulemaking Procedures Policy Statement and broadly disseminate it to all employees involved in rulemaking activities; and (2) consider establishing documentation standards for rulemaking economic analysis to help ensure reproducibility on an internal basis. In a response to our draft report, the Board stated that the two recommendations would be adopted.