"Costs versus benefits ... costs versus benefits."

That refrain is coming from business groups as they pressure financial regulators to go beyond a perfunctory attempt to demonstrate that each new regulation is worth the additional costs it imposes on industry.

How thoroughly the regulators must be when they gauge the costs and benefits of a new rule is currently a heated debate. In July 2011, an appellate court panel overturned new Securities and Exchange Commission proxy access rules, on grounds that the SEC hadn't sufficiently analyzed the costs versus the benefits. The U.S. Chamber of Commerce and the Investment Company Institute are now challenging commodity position limits imposed by the Commodity Futures Trading Commission on similar grounds. In Congress, legislation to force the SEC to engage in far more intensive cost-benefit analysis has been introduced by Rep. Scott Garrett, R-N.J., and Sen. Richard Shelby, R-Ala.

The difficulty regulators face was highlighted in a SEC debate over, of all things, disclosures companies must make when they manufacture products containing precious minerals that might have come from the Democratic Republic of the Congo, a war-torn country where trade in many precious metals helps fuel and fund conflict.

What does the SEC know about war in the DRC? According to the commissioners themselves, not much. But that didn't stop Congress from inserting into the Dodd-Frank Act an order for the SEC to write rules requiring that companies disclose their use of so-called conflict minerals. After sharp debate, the SEC issued the rules at its Aug. 22 meeting.

Although much of the commissioners' debate was over the wisdom of using the agency to carry out foreign policy objectives, the two Republican commissioners opposing the provision, Daniel M. Gallagher and Troy A. Paredes, seized on the issue to highlight how the cost-versus-benefit analysis should come into play in all SEC rulemakings.

They argued that even though Congress ordered the agency to act, the SEC should kick the mandate back to lawmakers with an explanation that the agency couldn't properly evaluate the issue.

Paredes said the SEC in this case was wrong to issue a rule when it acknowledged in its economic analysis that it was far outside of its expertise and could not measure the costs and benefits. "The agency still must base its final rule on a reasoned assessment that considers the potential consequences of its judgments," he said. "Otherwise, one cannot determine whether the rule is likely to do more good than harm."

No matter how horrible the Congo war, Paredes said, good intentions "cannot substitute for a rigorous analysis of whether social benefits are likely to be realized." He said that the rule should not have been approved without an inquiry into whether a de facto embargo would be effective and be a humanitarian choice compared to other public-policy alternatives.

Gallagher agreed. Even though the economic analysis covered 80 pages, he said "[w]e are left with no empirically founded sense of what the particular benefits are, as compared to the significant, identifiable costs," he said. "The statutory framework that serves to establish the SEC's economic analysis obligations does not permit the agency to infer benefits. More is expected -- and should be expected."

The debate over the conflict minerals rule is not a one-off event for the SEC. A key element of the debate can be applied to the plethora of rules the SEC and other agencies are drafting to implement the Dodd-Frank Act: How far must they go to assess cost versus benefits?

That debate is critical. In today's politically charged environment, the demand that the benefits of a new rule be proved to far outweigh its costs can be used to shut down a rulemaking when a minority of opposing commissioners would not otherwise have the votes to stop it.

Consumer groups complain that's just what the Dodd-Frank Act's GOP enemies are gearing up to do. Some consumer groups have suggested that the push by the GOP and business groups to require the analyses amounts to an attempt to prevent additional regulation or to tie regulations up in court challenges. They strongly question the need for the SEC to conduct cost-benefit analysis, especially in instances when Congress specifically directs the agency to act.

Ira Teinowitz covers financial regulation for The Deal magazine.