Archive for the ‘Regulation’ Category

The Permanent Subcommittee on Investigations has weighed in on the progress the Internal Revenue Service (IRS) has made after last years’ “scandal,” and the majority is advocating bright line rules for political activity for nonprofits.

Committee members criticized the current facts and circumstances test and called for its replacement, lending their voice to the many nonprofits and citizens that have been calling for a bright-line definition of political activity applicable to all nonprofits. Such a rule would make it easier for nonprofits to engage in our democracy without fear of jeopardizing their nonprofit status.

“The facts and circumstances test used by the IRS was criticized as difficult to administer by every IRS official interviewed,” says the report.  It goes on to say that the test “produced subjective and inconsistent decisions on applications.”

The minority staff filed a separate report, and did not discuss the facts and circumstances test or provide recommendations for the future. The full report is available here.

The IRS is currently engaged in a rulemaking that could provide the sort of easily administered definition the report – and Public Citizen’s Bright Lines Project – calls for. A new draft of the rules is expected early next year.

Emily Peterson-Cassin is the Bright Lines Project Coordinator for Public Citizen’s Congress Watch division

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This Labor Day, I’ll be thinking about my family.

My great grandfather, an immigrant from eastern Europe who crossed the Atlantic to work in a western Pennsylvania steel mill, died in that mill in 1929 when a piece of industrial equipment came crashing down on him.

His daughter – my grandmother – was less than a year old.

How many millions of families have suffered similar tragedies? The deadly nature of work in the “Steel Valley” is well documented. Local histories and literary classics such as Blood on the Forge and Out of This Furnace testify to this bloody past.

Clearly, we’ve come a long way since 1929, most significantly with the formation of the Occupational Health and Safety Administration (OSHA) in 1971.

Nevertheless, tragic workplace deaths occur in America almost every day. Scroll through OSHA’s 2014 document recording “FY14 Fatalities and Catastrophes to Date” (PDF), and you’ll begin to get a sense of the lives lost each day that may have been prevented.

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As America approaches the sixth anniversary of the 2008 financial crash, here’s an encouraging thought: The mega-banks can be broken up. It’s already in the law. Forty-one words of the 2,000-page Dodd Frank Wall Street Reform Act empower the regulators to take this step. To exercise this momentous power, the regulators must take some initial steps in preparation. And on August 5, 2014, the regulators did just that.

Some background: On September 15, 2008, Lehman Brothers declared bankruptcy. Normally, bankruptcy serves as an orderly means to either close a business or reorganize it. Creditors suffer a reduction if not complete loss of the funds lent to the bankrupt company. Lehman’s bankruptcy, however, triggered contagion throughout the economy. Why? Because its size and complexity touched too many creditors. When some of the same internal problems Lehman suffered became manifest at other mega-banks, Washington responded with bailouts for them rather than triggering more unmanageable contagion from bankruptcies. These banks were simply too big to fail (TBTF). What’s more, the government’s crisis managers actually made the TBTF problem worse by consolidating some of the smaller, failing firms, with the largest failing firms. To JP Morgan’s sprawling empire, for example, the government added Bear Stearns and Washington Mutual.

The Dodd-Frank Wall Street Reform Act attempted to address TBTF with numerous provisions. In Section 165, mega-banks must adopt “credible” provisional bankruptcy plans colloquially known as “living wills.” To be credible, they must prove to regulators that their failure could be handled in an orderly fashion and would not trigger financial contagion or require public funding assistance. If regulators determine they are “not credible,” regulators can order changes, including divestiture of assets — a break-up. These powers are contained in 41 words of the Dodd-Frank statute.

On August 5, the Federal Reserve and Federal Deposit Insurance Corp. declared that the “living will” plans by 11 large banks submitted in 2013 are “not credible.” The 11 banks are Bank of America, Citigroup, JP Morgan, Goldman Sachs, Morgan Stanley, Bank of New York Mellon, State Street, and the US units of Barclays, Credit Suisse, Deutsche Bank, and UBS.

Six years after the financial crisis demonstrated that the mega-banks are too big to fail, regulators have now officially determined that more must be done before one can fail without triggering a bailout.

Why did the banks fail to submit credible plans? Some argue that the banks’ failed intentionally. They don’t want to produce a roadmap for orderly deconstruction because, at the point of failure, they want a government bailout. FDIC Vice Chair Tom Hoenig provided some evidence for this theory when he expressed dissatisfaction that the mega-banks derivatives portfolios hadn’t be altered to make them part of the bankruptcy process. Currently, derivatives can be settled immediately with the declaration of bankruptcy even as other credit relations must wait for the court. Derivatives are the bets banks make, largely with other banks. About a third of the world’s $700 trillion in outstanding derivatives bets are held by just four American banks.

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Pennsylvania Governor Tom Corbett, an opponent of Environmental Protection Agency’s (EPA) Clean Power Plan, is convening a “Jobs 1st Summit” in Pittsburgh this week.

Pennsylvania currently ranks 48th out of the 50 states in job growth. Despite the abundance of evidence that regulations can create jobs, Corbett often echoes the U.S. Chamber of Commerce talking point about “job-killing regulations.”

An instructive item on the summit agenda is an energy industry panel moderated by Chris Abruzzo, secretary of Pennsylvania’s EPA.

Abruzzo claimed during confirmation hearings to be unaware that climate change is harmful. And Pennsylvanians are supposed to trust this official to protect our air, water and public lands?

Abruzzo’s appointment and role at the summit as moderator of a discussion among executives of polluting industries shows the absurd degree Corbett’s administration is willing to distort the priorities of government agencies that are supposed to protect the public interest.

Such a summit of CEOs begs the question: Does giving corporations everything they want translate to prosperity to the rest of us?

The obvious answer: Of course it doesn’t.

As a general rule, cost-benefit analyses are suspect.

Such analyses – which federal agencies perform to weigh the health and safety “benefits” of regulations (benefits like lower infant mortality rates and reliably safe and clean drinking water) against the “cost” of lost profits to Corporate America – result in a distorted model of a regulation’s impact. Invariably, the distortion creates a bias that exaggerates the regulation’s “cost,” largely because cost (measured in dollars and cents) is more easily quantified than benefits.

So one might think it’s a good thing that economists at the FDA have started factoring in pleasure – or, more specifically, its loss – when weighing the costs and benefits of new regulations. And one might think that a regulation that is expected to result in lower infant mortality rates, fewer cancer diagnoses, and longer, healthier lives for the American public to be a winner in terms of “pleasure,” right?

Unfortunately, one would be wrong.

Shockingly, the FDA’s cost-benefit analysis for a new tobacco regulation resulted in the rule’s projected health and safety benefits – fewer instances of heart and lung disease and fewer early deaths – being reduced by 70 percent due to the “loss in pleasure” smokers endure when trying to break their addiction.

As an ex-smoker myself (tobacco-free since 2008), I am well aware that the symptoms of nicotine withdrawal certainly constitute a “loss in pleasure.” But the notion that a smoker’s physical discomfort for a relatively brief period of time somehow trumps by 70 percent the health benefits of quitting (not to mention the increase in one’s disposable income and the gradual restoration of one’s senses of taste and smell) is utterly outrageous.

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