Supreme Court Slams Dodd-Frank Provision Unconstitutional
Friday, 09 May 2014 08:23 AM
By John Berlau
It has long been known that like Obamacare, the Dodd-Frank financial
"reform" rammed through Congress in 2010 is extremely burdensome and
counterproductive.
Now for the first time, a court has found a portion of the law to be
unconstitutional as well.
The April 14 ruling of the D.C. Circuit Court of Appeals that
Dodd-Frank's "conflict minerals" disclosure mandate violates the First
Amendment is the first time ever a court has ruled that a provision of
Dodd-Frank violates the Constitution.
Regulations issued under Dodd-Frank have been struck down for reasons
such as inadequate cost-benefit analysis and other procedural
violations, but this is first time a provision has been found to be
unconstitutional.
And it couldn't happen to a more misguided and destructive provision
of the law! As my Competitive Enterprise Institute colleague Hans
Bader and I have written in blog posts, articles, and regulatory
comments, the conflict disclosure mandate creates a compliance
nightmare, hurts American miners and manufacturers, and does the
greatest harm to those it was intended to help -- the struggling worker
in and nearby the Democratic Republic of Congo.
As explained by Mercatus Center scholars Hester Peirce and James
Broughel in their book Dodd-Frank: What It Does and Why It's Flawed,
the "conflict minerals" mandate of Section 1502 is one the law's many
"miscellaneous provisions" that offer "a clear example of how a
statute invoked as the answer to the financial crisis is, in reality,
an odd conglomeration of responses to issues, many of which had
nothing to do with the financial crisis."
Section 1502, championed by celebrities, including Ashley Judd and Ben
Affleck, requires all types of firms to disclose their products' use
of five "conflict minerals" -- including gold, tin, and tungsten -- that
can be sourced to war-torn regions of the Congo.
Fighting violence in the Congo is a laudable goal, but it defies
common sense and basic civics to pursue foreign-policy objectives
through a banking and investment bill. The government entity charged
with enforcing this provision is neither the State Department nor the
Defense Department, but rather the Securities and Exchange Commission
-- which no one would call an agency well-schooled in the nuances of
foreign policy.
The court looked at this leap of logic and decided that the provision
could not survive the First Amendment's prohibition against "compelled
speech," even under the lesser standard for "commercial speech."
As Judge A. Raymond Randolph wrote in the majority opinion, this
compelled speech is not even "reasonably related" to the SEC's mission
of "preventing consumer deception." The opinion concludes, "By
compelling an issuer [publicly-traded company] to confess blood on its
hands, the statute interferes with that exercise of the freedom of
speech under the First Amendment."
Today's opinion is especially good news for residents of the Congo,
who have seen more blood and more poverty as a result of this
misguided mandate. In a New York Times Op-Ed, journalist David Aronson
describes how Dodd-Frank's conflict mineral mandate is acting as a
backdoor tariff and re-impoverishing Africa.
Among the effects Aronson describes: "Mining towns are virtually cut
off from the outside world because the planes that once provisioned
them no longer land. . . . Villagers who relied on their mining income
to buy food when harvests failed are beginning to go hungry."
Hopefully, other courts will take heed of this great ruling and start
striking down the many other unconstitutional provisions of
Dodd-Frank, including the ones being challenged by CEI and our
co-plaintiffs.
John Berlau is director of the Center for Investors and Entrepreneurs
at the Competitive Enterprise Institute. He is the author of the book
"Eco-Freaks."
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