With Aims to Jumpstart US Growth, Obama Orders Review of Regulations

(January 18, 2011) — President Barack Obama has announced the launch of a review in an op-ed in the Wall Street Journal targeting “excessive” regulations that thwart economic advancement, noting that the nation’s regulatory framework has an often “chilling effect” on job growth.

“We are clearly moving from a period of light regulation to one of a heavier touch,” Carl Hess, global head of investment at Towers Watson, told aiCIO when asked about the impact the president’s positions toward regulation could have to the pension world. “Managers facing the costs of heavier regulation will undoubtedly find a way to pass on the costs, and this will result in lower benefits for participants.” Hess noted that in “heavier touch” jurisdictions, pensions are often regulated like insurers with asset/liability matching and/or surplus requirements, which provides a downside for equity managers.

Despite the announcements, Hess has affirmed his opinions about the merits of regulation, saying that returned regulation is a move in the right direction. Hess remarked in a 2009 Watson Wyatt annual report that with regulation returning, faith in the system must be restored. Overly severe regulation, Hess said, could stifle growth.

The President’s remarks in the Wall Street Journal reflect the latest efforts by the White House to increase investment by the nation’s biggest multinationals, aiming to mend relations with corporate America. “We’re looking at the system as a whole to make sure we avoid excessive, inconsistent and redundant regulation,” Obama wrote in the opinion piece. “And finally, today I am directing federal agencies to do more to account for — and reduce — the burdens regulations may place on small businesses. Small firms drive growth and create most new jobs in this country. We need to make sure nothing stands in their way.”

The President wrote that he intends to issue an executive order initiating the review. He blamed the government for failing the public in meeting its “basic responsibility to protect the public interest” since the financial crisis, citing rules that have placed burdens on businesses and stifled innovation.

A related memo also states that agencies:

• Should coordinate with each other to reduce redundant, inconsistent or overlapping regulatory requirements.
• Should consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public as much as possible.
• Must ensure objectivity of any scientific and technological information and processes to support its actions.
• Should consider how to promote retrospective analysis of rules that may be outmoded ineffective, insufficient or excessively burdensome.