In January, the Federal Reserve System announced a “pilot project” directing the six largest U.S. banks to conduct a “ climate scenario analysis .” More recently, the Fed published a 52-page set of instructions on how these banks must provide this information the Fed demands. Apparently, the Fed now believes its authority extends beyond bank supervision and into climate policy, which is “far outside of its statutory mandate,” as Sen. Dan Sullivan (R-AK) and eight of his colleagues pointed out in a letter to Fed Chairman Jerome Powell this month.

The Paperwork Reduction Act requires federal agencies, including the Fed, to seek and obtain the Office of Management and Budget's approval before getting information from the public. The law and OMB’s 1995 implementing regulations require the Fed to publish notice and accept public comments for no less than 60 days and publish a second notice responding to public comments no less than 30 days prior to seeking OMB approval. These notices must include, among other things, references to the Fed’s “pertinent statutory authority” (which Sullivan’s letter indicates the Fed does not have) and credible estimates of “practical utility” (the benefits of the information) and its “burden” (the costs to collect it). CREDIT CARDS: WHAT CREDIT SCORE DO YOU NEED TO GET A CREDIT CARD

The Fed did none of these things.

The Fed knows how to comply with the Paperwork Reduction Act. It has approval from the OMB for 140 information collections totaling 41,697,185 responses requiring at least 6,849,186 hours to complete. In this case, the Fed chose not to comply. This is what insiders call a “bootleg” — a case in which an agency negligently or (more likely) knowingly evades its statutory responsibilities under the Paperwork Reduction Act. Often this occurs when the agency is lazy or in a hurry and decides that obeying the law is just too time-consuming. It also occurs when the targets of its information collection don’t know their legal rights.

About those legal rights: OMB is not legally allowed to give an agency retroactive approval for a bootleg. And without prior OMB approval, none of the six banks targeted by the Fed has any legal obligation to provide it. Should the Fed attempt to penalize them for failing to comply, the Fed’s failure to obtain OMB approval is an affirmative defense in federal district court. (An affirmative defense is one that, once exercised, entitles the penalized party to summary judgment against the agency.)

The six banks targeted by Fed do have a real problem, however. The Fed has made it hard for them to exercise and vindicate their legal rights by pretending that their informational demand is exempt from the Paperwork Act. For its part, OMB has a history of allowing this sort of mischief. Should the banks resist and prevail, the Fed could easily retaliate by exercising its supervisory discretion in unlawful ways. The banks have to consider whether standing up for the rule of law could backfire to the detriment of their shareholders and customers.

The Fed is not unique. Many federal agencies routinely violate the Paperwork Reduction Act. They do so when they are lazy, hurried, or venal. This is especially common in situations in which the public depends on favorable agency action. Examples range from patents (more than 650,000 patent applications were submitted in 2021 alone) to permits for individual infrastructure projects (such as the Mountain Valley Pipeline project that is near and dear to Sen. Joe Manchin, a West Virginia Democrat) to demands like this for information under credible threat of retaliation. In these cases, and many more, an agency has unfettered discretion to demand information from the public without complying with the PRA.

This raises another important point: The Paperwork Reduction Act has become outdated. Its public protection provisions, which seemed extraordinarily strong back in 1995, were grounded on the assumption that agencies caught violating the law would feel remorse and resume conducting their affairs lawfully. Maybe that assumption was valid then, but it’s certainly not today.

Right now, federal agencies routinely take actions that lack delegated statutory authority, especially on matters in which the president has staked out a policy position contrary to law and dared Congress to do something about it. (Insider tip: Any presidential directive to implement a “whole of government” approach is bound to be unlawful. Congress rarely writes laws this way.)

Sullivan and his colleagues can stop the Fed from implementing this “pilot” project by shining a bright light on its violation of the Paperwork Reduction Act. As a bonus, this bright light also may deter OMB from violating its statutory responsibilities under orders from the president. Nothing is certain, however. If the president does not care about the rule of law, you can be sure OMB won’t care, either.

An oversight hearing with testimony from the Fed chairman and the relevant political officials from OMB would be an excellent way to get both organizations to commit to behaving lawfully.

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Richard Belzer is an independent consultant in regulation, risk, economics, and information quality.