During an April 18 hearing by the House Financial Services Committee, Rep. Patrick McHenry (R-N.C.) and other committee members criticized Securities and Exchange Commission (SEC) Chair Gary Gensler for his “rushed” approach to rulemaking.
Gensler’s policies around climate-related disclosures came under hot water, with McHenry accusing the SEC chair of “endangering American competitiveness.”
McHenry, chairman of the House committee, painted Gensler’s SEC as an agency that is overstepping its authority and refusing to consider criticism.
“Time and time again, you’ve cut the public out of the rulemaking process with unreasonably short comment periods, even for major rules like your disastrous climate disclosure proposal and equity market structure overhaul,” the congressman said. “You failed to justify these significant rules with thorough evidence, careful studies, and even cost-benefit analysis.”
In March 2022, the SEC proposed climate-related rules that would require businesses registered with the commission to produce periodic reports on “climate-related risks that are reasonably likely to have a material impact on their business.”
Registrants would also be required to disclose their greenhouse gas emissions to the SEC.
The agency argues that investors have a right to such information, so they can weigh the risks that climate change might have on their investments. In his prepared testimony for the recent hearing, Gensler said that while “the SEC has no role as to the climate risk itself,” it does have a duty to make public “companies’ full, fair, and truthful disclosure about material risks.”
The agency received over 15,000 comments regarding its proposal, Gensler said during an interview with CNBC in February.
Rep. Maxine Waters (D-Calif.), ranking member of the House finance committee, defended the SEC’s climate proposal.
“Republicans are desperately trying to hamper the finalization of the SEC Rule on climate-based disclosures, which will finally provide the material information that investors have been asking for to evaluate how their investments will fare as climate change worsens,” she said.
Playing Fast-and-Loose with Regulation
Still, McHenry characterized Gensler’s approach as too hasty, calling out the SEC chair’s 55 new rule proposals in the last two years.
“That’s twice as many rules as your predecessor Mary Jo White and Jay Clayton in the same amount of time,” McHenry said, adding that there is a growing concern about regulatory overreach.
“This raises serious concerns that the rulemaking process is being rushed, undermining the quality of our securities laws and risking negative unintended consequences,” the congressman said. “These concerns have been echoed by senior personnel at your own agency, and they are similar concerns raised while you were at the Commodity Futures Trading Commission.”
In October, a report by then SEC Inspector General Nicholas Padilla criticized Gensler for exhibiting a disorganized and hurried management style. It specifically pointed to Gensler’s introduction of 26 rules in the first half of 2022, exceeding the combined totals of the previous two years.
The report also noted that the agency is losing workers at its highest rate in a decade and that Gensler recruited inexperienced staff from other agencies so he could quickly push new rules, according to Bloomberg Law.
Gensler defended his methodology by saying the more disclosures, the better.
“[Regulation] lowers the risk in the markets when you can lower the amount of fraud manipulation, and you promote good transparency,” he said during the hearing.
Some economists disagree with this premise. Peter Schiff, founder of Euro Pacific Asset Management, argues too much central planning can result in counterproductive market distortions and corrupt behavior.
Free market competition does a much better job of lowering risk than government regulation,” Schiff told The Epoch Times. “In fact, by lowering competition and creating moral hazards, government regulation actually increases risk.”
“Government regulators are far more likely to be corrupted than private third-party players that government regulators supplant,” Schiff said.
From The Epoch Times