As economic and social contexts change, public policies may not be updated by policymakers despite their recognition of alternatives. This is because the power to decide whether new regulations will be implemented lies with the courts, leaving regulators feeling helpless.
An example of this in action is the regulation proposed by the Fed, FDIC, and Comptroller to bring U.S. banks into compliance with Basel III. This agreement aims to make banks stronger by requiring them to increase capital reserves, reduce debt, and be more attuned to market conditions. However, the banking industry opposes these requirements as they would impact profits. Despite this opposition, Fed Chair Jerome Powell has promised changes before the rule is finalized, with a likely legal challenge following.
The influence of Loper Bright on litigation surrounding such regulations is expected to be significant. Legal challenges based on the Administrative Procedures Act and doctrines such as “major questions” and “nondelegation” could impact challenges to anti-money laundering regulations and potential regulations on cryptocurrency by the Securities and Exchange Commission (SEC).
In essence, Loper Bright’s pro-drift stance gives judges more power over regulatory matters, potentially hindering necessary updates to policies in response to changing economic or social conditions. The influence of intense minority interests and political actors can further exacerbate these challenges faced by policymakers in updating regulations to reflect current conditions.