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Under- Standing the Threat of Agency Capture Hearing S. HRG. 111–905 PROTECTING THE PUBLIC INTEREST: UNDER- STANDING THE THREAT OF AGENCY CAPTURE HEARING BEFORE THE SUBCOMMITTEE ON ADMINISTRATIVE OVERSIGHT AND THE COURTS OF THE COMMITTEE ON THE JUDICIARY UNITED STATES SENATE ONE HUNDRED ELEVENTH CONGRESS SECOND SESSION AUGUST 3, 2010 Serial No. J–111–105 Printed for the use of the Committee on the Judiciary ( U.S. GOVERNMENT PRINTING OFFICE 64–724 PDF WASHINGTON : 2011 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 VerDate Nov 24 2008 12:17 Mar 16, 2011 Jkt 064724 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 S:\GPO\HEARINGS\64724.TXT SJUD1 PsN: CMORC COMMITTEE ON THE JUDICIARY PATRICK J. LEAHY, Vermont, Chairman HERB KOHL, Wisconsin JEFF SESSIONS, Alabama DIANNE FEINSTEIN, California ORRIN G. HATCH, Utah RUSSELL D. FEINGOLD, Wisconsin CHARLES E. GRASSLEY, Iowa ARLEN SPECTER, Pennsylvania JON KYL, Arizona CHARLES E. SCHUMER, New York LINDSEY GRAHAM, South Carolina RICHARD J. DURBIN, Illinois JOHN CORNYN, Texas BENJAMIN L. CARDIN, Maryland TOM COBURN, Oklahoma SHELDON WHITEHOUSE, Rhode Island AMY KLOBUCHAR, Minnesota EDWARD E. KAUFMAN, Delaware AL FRANKEN, Minnesota BRUCE A. COHEN, Chief Counsel and Staff Director BRIAN A. BENZCOWSKI, Republican Staff Director SUBCOMMITTEE ON ADMINISTRATIVE OVERSIGHT AND THE COURTS SHELDON WHITEHOUSE, Rhode Island, Chairman DIANNE FEINSTEIN, California JEFF SESSIONS, Alabama RUSSELL D. FEINGOLD, Wisconsin CHARLES E. GRASSLEY, Iowa CHARLES E. SCHUMER, New York JON KYL, Arizona BENJAMIN L. CARDIN, Maryland LINDSEY GRAHAM, South Carolina EDWARD E. KAUFMAN, Delaware STEPHEN C.N. LILLEY, Democratic Chief Counsel MATTHEW S. MINER, Republican Chief Counsel (II) VerDate Nov 24 2008 12:17 Mar 16, 2011 Jkt 064724 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 S:\GPO\HEARINGS\64724.TXT SJUD1 PsN: CMORC C O N T E N T S STATEMENTS OF COMMITTEE MEMBERS Page Feingold, Hon. Russell D., a U.S. Senator from the State of Wisconsin, pre- pared statement ................................................................................................... 50 Franken, Hon. Al, a U.S. Senator from the State of Minnesota .......................... 3 Kaufman, Hon. Edward E., a U.S. Senator from the State of Delaware ............ 4 Whitehouse, Hon. Sheldon, a U.S. Senator from the State of Rhode Island ...... 1 WITNESSES Bagley, Nicholas, Assistant Professor of Law, University of Michigan Law School, Ann Arbor, Michigan .............................................................................. 6 Shapiro, Sidney, Associate Dean for Research and Development, Wake Forest University School of Law, Winston-Salem, North Carolina, and Member Scholar, Vice-President, Center for Progressive Reform ................................... 8 Troy, Tevi D., Ph.D., Visiting Senior Fellow, The Hudson Institute, Silver Spring, Maryland ................................................................................................. 9 SUBMISSIONS FOR THE RECORD Babcock, Hope M., Professor of Law, Georgetown Law, Washington, DC, letter ...................................................................................................................... 34 Bagley, Nicholas, Assistant Professor of Law, University of Michigan Law School, Ann Arbor, Michigan, statement ........................................................... 38 Carpenter, Daniel, Allie S. Freed Professor of Government, Director, Center for American Political Studies, Harvard University, Cambridge, Massachu- setts, letter ............................................................................................................ 46 Consumers Union, Ellen Bloom, Director, Federal Policy and Washington, Office; and Ami V. Gadhia, Policy Counsel, Washington, DC, letter ............... 48 Earthjustice, Joan Mulhern, senior Legislative Counsel, Washington, DC, let- ter .......................................................................................................................... 52 Logan, David A., Dean & Professor of Law, Roger Williams University, Bris- tol, Rhode Island, letter ....................................................................................... 54 Shapiro, Sidney, Associate Dean for Research and Development, Wake Forest University School of Law, Winston-Salem, North Carolina, and Member Scholar, Vice-President, Center for Progressive Reform ................................... 56 Snape, William J., III, Senior Counsel, Center for Biological Diversity, Amer- ican University’s Washington College of Law, Washington, DC, statement ... 72 Troy, Tevi D., Ph.D., Visiting Senior Fellow, The Hudson Institute, Silver Spring, Maryland ................................................................................................. 74 Wagner, Wendy E., Joe A. Worsham Centennial Professor, University of Texas School of Law, statement .......................................................................... 77 (III) VerDate Nov 24 2008 12:17 Mar 16, 2011 Jkt 064724 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 S:\GPO\HEARINGS\64724.TXT SJUD1 PsN: CMORC VerDate Nov 24 2008 12:17 Mar 16, 2011 Jkt 064724 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 S:\GPO\HEARINGS\64724.TXT SJUD1 PsN: CMORC PROTECTING THE PUBLIC INTEREST: UNDER- STANDING THE THREAT OF AGENCY CAP- TURE TUESDAY, AUGUST 3, 2010 U.S. SENATE, SUBCOMMITTEE ON ADMINISTRATIVE OVERSIGHT AND THE COURTS, COMMITTEE ON THE JUDICIARY, Washington, DC. The Subcommittee met, pursuant to notice, at 10:03 a.m., in room SD–226, Dirksen Senate Office Building, Hon. Sheldon Whitehouse, Chairman of the Subcommittee, presiding. Present: Senators Whitehouse, Kaufman, and Franken. OPENING STATEMENT OF HON. SHELDON WHITEHOUSE, A U.S. SENATOR FROM THE STATE OF RHODE ISLAND Chairman WHITEHOUSE. The hearing of the Subcommittee will come to order. We will be proceeding without the Ranking Member. He has responsibilities elsewhere because of the Kagan nomination coming to the floor this morning and because of an appointment he has at the White House as well. So it is a scheduling conflict that is unavoidable. But I am delighted that the witnesses are here. I have a brief statement I would like to make, and then the wit- nesses will be sworn. If other Senators have arrived, we will give them an opportunity to make a similar opening statement, and then we will get to your testimony, which is the order of the day. Over the last 50 years, Congress has passed critical pieces of leg- islation to protect the public interest—laws that protect the water that Americans drink and the air we breathe, ensure the safety of the cars we drive and the medications we take, and require the fair and open trading of the stocks and mutual funds Americans invest in to finance retirement or our children’s education. In these and other areas, Congress has tasked an alphabet soup of regulatory agencies with the responsibility of administering the policies established by Congress through rulemaking, adjudication, and enforcement. As a result, regulatory agencies have vast and vital responsibilities to Congress and the American people. It is, thus, a vast and vital consequence that regulatory agencies retain their integrity, that they serve the public interest, and fulfill the missions defined by Congress. Our administrative state has grown more complex than anything that our Founding Fathers foresaw. The fundamental principle is that the administrative agencies must further the policies crafted (1) VerDate Nov 24 2008 12:17 Mar 16, 2011 Jkt 064724 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\64724.TXT SJUD1 PsN: CMORC 2 by Congress. But beyond that, the genius of the Framers of our Constitution at crafting checks and balances in Government was never applied to our modern administrative state. Here we are on our own. It is often not in the economic interests of regulated industries to support the mission Congress has defined. Regulations that pro- tect the public interest rather than the special interests do not al- ways go down well with industry. Industries often have incentives to co-opt and to control regulatory agencies. Observably, time and time again, industries have acquired undue influence over regu- latory agencies that exist to serve all Americans. Surreptitiously and stealthily, industries have sought to control regulatory agen- cies, to capture agencies. Sadly, industries too often have suc- ceeded, turning agencies away from the public interest to the serv- ice of narrow corporate interests. We have seen the disasters that can ensue when an agency has been captured, from MMS, whose failures and shocking behavior led to the horrors of the oil spill in the Gulf, to the SEC, asleep at the switch as financial services companies created exotic and ir- responsible financial products that took our economy to the brink of disaster. These are the fruits of regulatory capture: the revolving door, de- liberate inattention, industry control, often outright corruption. It is a poisonous tree indeed. This threat of agency capture is by no means a novel concept. As I have described previously on the floor, from Woodrow Wilson in 1913 through Marver Bernstein, the first dean of the Woodrow Wil- son School at Princeton in 1955, to the Nobel Prize-winning econo- mist George Stigler, to the editorial page of the Wall Street Journal this year, Americans from across the political spectrum have recog- nized the continuing danger of agency capture. At bottom,
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