Wagner Bill Halting DOL Fiduciary Rule Passes House Panel

Barbara Roper, director of Investor Protection for the Consumer Federation of America, said after Wagner’s bill passed that “today’s vote forces us to choose between seeing the glass as half-full or half-empty. Certainly it is disappointing that a majority of Committee members voted in favor of a bill that would call a halt to regulatory efforts to ensure that all retirement savers get advice that serves their best interests. And the pretense that this is being done to protect retail investors is particularly galling,” Roper said. 

On the other hand, she continued, “all but one Committee Democrats voted against a measure that once claimed strong bipartisan support. Clearly, Democratic support for the Department of Labor rulemaking has solidified as members have recognized that the rule that has been proposed is balanced, that the Department is open to making reasonable changes to make the rule more flexible and streamlined, and that retirement savers cannot afford to wait for an SEC rulemaking that may never come. We are grateful to the many members of the Committee who voiced strong support for the DOL effort.”

If her bill is blocked by the Senate and President Barack Obama, Wagner has stated that she believes “there are ways, through the appropriations process,” to stop DOL’s fiduciary rule.  

Meanwhile, a letter sent by Sen. Elizabeth Warren, D-Mass., to Dr. Robert Litan, a nonresident senior fellow at the Brookings Institution, challenging his critical study on DOL’s fiduciary rule, has resulted in his resignation from that post. Warren stated that Litan’s study, titled “Good Intentions Gone Wrong: The YetToBeRecognized Costs of the Department Of Labor’s Proposed Fiduciary Rule,” opposing DOL’s rule “contained a broad – but vague – disclosure, stating that ‘funding for this study was provided by the Capital Group, which provides investment services worldwide.’”

The study, released in July, states that DOL’s Regulatory Impact Analysis concludes “erroneously that the net benefit of the rule would be roughly $4 billion per year (the Council of Economic Advisers, making related errors, pegs the benefit at $17 billion). A conservative assessment of the rule’s actual economic impact—taking into account the categories of harm noted above that are ignored by DOL and CEA—finds that the cost of depriving clients of human advice during a future market correction (just one of the costs not considered by DOL) could be as much as $80 billion, or twice the claimed tenyear benefits that DOL claims for the rule.”

After questioning Litan on the study, Warren said that he told her that the Capital Group commissioned Economists Inc. to have Litan and Dr. Hal Singer conduct the study, and that “Economists, Inc. was paid $85,000 for us to conduct” the 28 page study. Litan further clarified that “my personal share was $38,800,” which Warren stated showed a clear financial conflict.

Litan is senior consultant to Economists Inc.

Warren noted that Litan also provided “two additional pieces of previously undisclosed information – that the study was funded entirely by the Capital Group and that the Capital Group provided ‘feedback on our initial outline and some editorial comments’” on the study.