As I mentioned in my prior post, I’ll be using the Volcker Rule as a case study to demonstrate that an important critique of Dodd-Frank – the extent to which it leaves core substantive definitional work to regulatory agencies -- is a legitimate worry of the statute’s critics. This analysis paints a picture of robust industry representation in the rulemaking process and progressively less public involvement in and attention to the Volcker Rule as the action moved from the legislature, to the initial call for public comments, to the more in-depth face time with regulators.
Let’s begin with the public comment letters. The newly formed Financial Stability Oversight Counsel’s first action was a request for public comments on the Volcker Rule, after which it received over 8000 comments – at first blush, an extraordinary display of public interest in a fairly technical piece of financial reform legislation.
But, “wait!” you might say. “I thought you just said that the public didn’t care about Volcker implementation and that’s why Congress may have left the legislation vague to begin with! This is exactly the type of academic double talk I can’t stand!”
Let me explain. The FSOC concluded that, of these 8000 comment letters, roughly 6,550 “were substantially the same letter arguing for strong implementation of the Volcker Rule.” The FSOC gave no further information about these letters and did not make them publicly available. But, based on our analysis of the remaining comment letters (which I’ll get to in just a moment) we believe that the 6,550 identical letters are the result of a Public Citizen (PC) action campaign, which provided a form letter urging the prompt implementation of the Volcker Rule and the closing of any loopholes.
We analyzed and hand coded the remaining roughly 1,450 comment letters. The FSOC concluded that these “remaining 1,450 comments each set forth individual perspectives from financial services market participants, Congress, and the public.” Nothing could be further from the truth. Tables 1-3 provide some very preliminary summary statistics on these comments. Click on any image to enlarge. [Caveat: We crunched to get these out for the Dodd-Frank anniversary, so they’ll need some clean-up and correction. But the general pattern should hold.]
First, we excluded duplicate postings by FSOC, leaving us with a total of 1374 comments. Of these, as detailed in Table 1, 1281, or 93%, were submitted by private individuals. The remainder was submitted primarily by industry members and trade groups, along with a small number of submissions from public interest groups, think tanks, academics, and congressional members. Again, at first blush, these numbers seem to confirm an extraordinary public interest in the Volcker Rule – the raw number of private individual comments dwarfs the comments submitted by all other categories of actors combined, including industry actors.
Yet, let us break down further these 1281 letters submitted by private individuals, as shown in Table 2. Of these, 766 use the same PC form letter, with some slight variations, as the other 6,550 identical letters that the FSOC did not post. Because many of these letters include some opening anecdote or concluding thoughts – such as a personal travail arising from the financial crisis –or, in some instances, use only a portion of the form (typically, the demands), these comments were not all identical. Therefore, they escaped whatever recognition software or rough exclusion methods FSOC used. Yet, they are the same – nearly identical -- substantive letter. Thus, of the 8000 letters received by FSOC on Volcker, 7316 (or 91%) are an identical form letter.
Let us now examine the remaining 515 comments submitted by private individuals that were not traceable to the PC form letter and compare them to letters from other groups. Table 3 shows the breakdown of comments from some of these groups by word count and evidences several patterns of interest. Chart 1 displays this information graphically, showing the distribution of word count by: private individual not using the PC form, private individuals using the form, and all others.
There are three spikes in the data, at less than 50 words, at 200-249 words, and at 250-299 words (note the larger bin size in the far right bar, representing comments with 800 words or more). The spikes at 200-249 words and 250-299 words represent the PC form letter and its slight variations, discussed above (in it’s original form that letter is 244 words.)
The spike at comments of less than 50 words are all (with one exception) letters from private individuals, represented in red in Chart 1. As you might expect in a comment of less than 50 words, these are typically short, non-substantive, and provide no meaningful guidance or relevant information to regulators, beyond the fact that members of the public continue to be angry about the financial institution bailouts.
In my next post, I’ll briefly compare the content of some these comments.
Related Posts:
Dodd-Frank By The Numbers: A Volcker Rule Case Study
x-posted at The Conglomerate
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