On August 3, Nicholas Bagley '05 testified before the Subcommittee on Administrative Oversight and the Courts of the Senate Judiciary Committee. Bagley was among three expert witnesses (including Sidney Shapiro of the Wake Forest School of Law and Tevi Troy, former deputy secretary of the U.S. Department of Health and Human Services) invited to speak during the hearing, which was titled “Protecting the Public Interest: Understanding the Threat of Agency Capture.”

“Our administrative state has grown more complex than anything our founding fathers foresaw,” said Senator Sheldon Whitehouse in his introduction. Whitehouse, who is chairman of the subcommittee, said that industries have sought and too often succeeded in controlling, or “capturing,” regulatory agencies for their own interest rather than the public’s. He pointed to two recent examples: “MMS [Minerals Management Service], whose failures and shocking behavior led to the horrors of the oil spill in the Gulf, to the SEC [U.S. Securities and Exchange Commission], asleep at the switch as financial services companies created exotic and irresponsible financial products that took our economy to the brink of disaster. These are the fruits of regulatory capture.”

In his testimony, Bagley, an assistant professor at the University of Michigan Law School, described the complicated and inconsistent definitions of agency capture, and stressed the need to address the practices surrounding it. He suggested a coordinated attack aimed at eliminating the conditions in which agency capture is likely to take root. Some agencies, Bagley said, have structural flaws that make them dependent on the industries they regulate because of funding or political backing. At agencies like these, “providing additional resources and ensuring that agency officials receive the political support necessary to do their jobs is essential,” Bagley said. He also suggested that agencies with multiple different responsibilities can be susceptible to capture. MMS, for example, had three different roles. “Against this conflict-ridden backdrop, it is unsurprising that the agency gave short shrift to its safety mission,” Bagley also proposed enhancing the prestige of agency jobs, and tightening restrictions on post-government employment in order to address the revolving door of officials moving to and from private industry.

Finally, Bagley noted that “addressing agency capture will require political vigilance. Far too often, an agency’s catastrophic failure or a scathing report from an Inspector General will produce loud calls for the reform, but the executive branch and congress end up papering over the problems once the furor dies down.”

Bagley and Dean Richard Revesz co-authored "Centralized Oversight of the Regulatory State," which was selected by the American Bar Association's section on Administrative Law and Regulatory Practice as the best article in the field published during 2006.

Posted August 6, 2010