Wall Street reform law bogged down

Republicans are blocking the nomination of Richard Cordray

Πηγή: Politico
By JOSH BOAK

Oct 30 2011

President Barack Obama signed the Dodd-Frank financial reform bill into law 15 months ago, saying he was anxious to put new rules of the road in place for Wall Street.

But federal agencies have blown about 77 percent of the rule-making deadlines for the massive overhaul, according to a recent progress report by the law firm Davis Polk — meaning key parts of the bill are far from implementation.

Some Democratic officials see a Republican plot afoot to run out the clock, in hopes that a GOP-controlled Senate and White House can overturn the reforms. But one top Treasury official said the missed deadlines are less of a concern to the administration than the possibility that a rushed process would result in poor regulations.

“We want quality and speed, but we’re not going to sacrifice quality for speed,” Deputy Treasury Secretary Neal Wolin told POLITICO. “We want to make sure that we do these rules in a thorough way.”

In some cases, Wolin said, politics are slowing down the process. Senate Republicans are blocking the nomination of Richard Cordray to head the new Consumer Financial Protection Bureau unless changes in governance are made to the agency. GOP lawmakers also have introduced bills to repeal all or part of the 848-page Dodd-Frank law.

“There are certainly some who’ve sought to delay or roll back provisions of Dodd-Frank or slow things down,” Wolin said. “We don’t think that’s helpful. What’s important now is we go about the business of putting in place a stronger financial system that will better protect our country.”

Republicans push back against the charge, saying that regulators are simply unable to write regulations from the law in a timely or effective way.

Obama has tried to spark more movement on the reforms by taking his case directly to the public in speeches and news conferences.

“What we’ve seen over the last year,” he said at a news conference this month, “is not only did the financial sector — with the Republican Party in Congress — fight us every inch of the way, but now, you’ve got these same folks suggesting that we should roll back all those reforms and go back to the way it was before the crisis.”

But a strategy that largely depends on standing behind a podium and shaming his opponents is unlikely to save the reforms from being killed or delayed, said Arthur Levitt, who was chairman of the Securities and Exchange Commission in the Clinton administration.

“A president that wants something as complex as this to take place has to devote an incredible amount of his resources and political capital to getting it done,” he said. “Left to the legislators and regulators, it will sink and rot in the miasma of dialogue and debate.”

In putting together the rules, regulators are sorting through thousands of comment letters and answering questions at congressional hearings and meetings with executives and lobbyists from the financial services industry. The sheer volume of activity makes it hard to act quickly or decisively, lending credence to worries that Republicans are obstructing progress.

“They hate it; they’re afraid to take it head on, so they’re trying to slow it down in hopes they take over the White House,” said Rep. Barney Frank (D-Mass.), one of the architects of the 2010 law.

Bart Chilton, who as a member of the Commodity Futures Trading Commission is among the regulators approving the new rules, said getting input from investment firms is critical, but some have less than helpful intentions.

“There are some people who all they want to do is run the clock out,” said Chilton, one of three Democratic commissioners. “Their goal isn’t thoughtful regulation, it’s no regulation.”

Republican staffers said there is no grand strategy for holding up regulations, emphasizing that their goal is to dismantle the law.

“If that is one of the side consequences, that’s not a terrible thing from our perspective,” a GOP Senate aide said. “We would rather most of these not happen in the first place. … Some people might be looking at it with 2012 in mind, but I don’t think that’s the primary thing.”

Much of the blame for the delay, Republicans said, rests squarely with federal agencies that lack the ability to meet the schedule set up by the law.

“The bad thing is that the deadlines are not reasonable or realistic,” said a Republican congressional aide. “The delay is from the regulators. We’re not controlling them.”

One financial industry executive said the law touches on so many parts of the economy that both sides have a fair point. Reasons for the delay can range from the intricacies of a regulation to partisan disputes to the roadblocks put up by investment firms to insufficient funding for regulators.

“There’s a whole mosaic of why the deadlines are being missed,” the executive said.

For example, the proposed Volcker rule introduced by agencies this month contributed to a sense of confusion. It came decked out with a 215-page preamble, 384 footnotes and requests for comment on 394 specific issues, the American Bankers Association said.

Named after former Federal Reserve Chairman Paul Volcker, it limits banks to proprietary trading that isn’t on behalf of their clients. The dense proposal failed to clarify the difference between proprietary trading and legitimate trading by banks to hedge risk or keep markets liquid.

Ken Bentsen, executive vice president for public policy at the Securities Industry and Financial Markets Association, fears that without sharp guidelines, the government could penalize banks for trading they believe was legal.

“What you think was allowed, you find out in the rearview mirror that it was not allowed,” he said.

Public Citizen, a watchdog group calling for greater Wall Street oversight, shared similar concerns about the vagueness of the proposal, but called it an “invitation for evasion” by banks.

According to the administration, the questions in the proposals show that agencies are being inclusive and responsive.

Republican lawmakers claim that regulators have not been exhaustive enough in assessing the potential economic impact of the rules.

After an investigation by inspectors general at the SEC and the CFTC, among other agencies, Sen. Mike Crapo (R-Idaho) expressed concern in June “that there are no uniform cost-benefit requirements for our financial regulators that focus on economic growth, job creation or competitiveness.”

Former SEC Commissioner Paul Atkins said the fundamental problem lies with Dodd-Frank itself, which he said forces regulators to climb “unscalable mountains” and issue rulings that are certain to face challenges in court.

The newly created Financial Stability Oversight Council, he said, faces the nearly impossible task of monitoring and quarantining “too big to fail” institutions. Atkins is skeptical that new entities such as the council can provide the kinds of safeguards being promised by the administration.

“Dodd-Frank,” he said, “is infused with this philosophy that a cabal of people like the oversight council can peer into the future at where a bubble is growing and prick it.”


Republican staffers said there is no grand strategy for holding up regulations, emphasizing that their goal is to dismantle the law.

“If that is one of the side consequences, that’s not a terrible thing from our perspective,” a GOP Senate aide said. “We would rather most of these not happen in the first place. … Some people might be looking at it with 2012 in mind, but I don’t think that’s the primary thing.”

Much of the blame for the delay, Republicans said, rests squarely with federal agencies that lack the ability to meet the schedule set up by the law.

“The bad thing is that the deadlines are not reasonable or realistic,” said a Republican congressional aide. “The delay is from the regulators. We’re not controlling them.”

One financial industry executive said the law touches on so many parts of the economy that both sides have a fair point. Reasons for the delay can range from the intricacies of a regulation to partisan disputes to the roadblocks put up by investment firms to insufficient funding for regulators.

“There’s a whole mosaic of why the deadlines are being missed,” the executive said.

For example, the proposed Volcker rule introduced by agencies this month contributed to a sense of confusion. It came decked out with a 215-page preamble, 384 footnotes and requests for comment on 394 specific issues, the American Bankers Association said.

Named after former Federal Reserve Chairman Paul Volcker, it limits banks to proprietary trading that isn’t on behalf of their clients. The dense proposal failed to clarify the difference between proprietary trading and legitimate trading by banks to hedge risk or keep markets liquid.

Ken Bentsen, executive vice president for public policy at the Securities Industry and Financial Markets Association, fears that without sharp guidelines, the government could penalize banks for trading they believe was legal.

“What you think was allowed, you find out in the rearview mirror that it was not allowed,” he said.

Public Citizen, a watchdog group calling for greater Wall Street oversight, shared similar concerns about the vagueness of the proposal, but called it an “invitation for evasion” by banks.

According to the administration, the questions in the proposals show that agencies are being inclusive and responsive.

Republican lawmakers claim that regulators have not been exhaustive enough in assessing the potential economic impact of the rules.

After an investigation by inspectors general at the SEC and the CFTC, among other agencies, Sen. Mike Crapo (R-Idaho) expressed concern in June “that there are no uniform cost-benefit requirements for our financial regulators that focus on economic growth, job creation or competitiveness.”

Former SEC Commissioner Paul Atkins said the fundamental problem lies with Dodd-Frank itself, which he said forces regulators to climb “unscalable mountains” and issue rulings that are certain to face challenges in court.

The newly created Financial Stability Oversight Council, he said, faces the nearly impossible task of monitoring and quarantining “too big to fail” institutions. Atkins is skeptical that new entities such as the council can provide the kinds of safeguards being promised by the administration.

“Dodd-Frank,” he said, “is infused with this philosophy that a cabal of people like the oversight council can peer into the future at where a bubble is growing and prick it.”