Passage of a sweeping overhaul of Wall Street regulations in 2010 was a hallmark of President Barack Obama's first term. Three years later, amid delays and compromises that critics say have diluted its ambitious goals, the president is trying to rekindle the law's promise.
Obama prodded the nation's top financial regulators on Monday to act swiftly and finish writing rules designed to prevent a recurrence of the 2008 financial crisis that helped precipitate a damaging recession from which the country is still recovering.
Obama met privately with Federal Reserve Chairman Ben Bernanke and seven other independent agency heads to emphasize his desire for comprehensive new rules as the five-year anniversary of the nation's financial near-meltdown approaches.
The law was considered a milestone in Obama's presidency, a robust response to the crisis, which led to a massive government bailout to stabilize the financial markets. But its implementation is behind schedule with scores of regulations yet to be written, let alone enforced.
Obama hoped to convey "the sense of urgency that he feels," spokesman Josh Earnest said before the president convened the meeting.
Lehman Brothers collapsed into bankruptcy on Sept. 15, 2008, and the administration has wanted to use that dubious milestone to look back on the lessons of the crisis and to chart the progress so far to prevent a recurrence. In a statement at the conclusion of the meeting, the White House said Obama commended the regulators for their work "but stressed the need to expeditiously finish implementing the critical remaining portions of Wall Street reform to ensure we are able to prevent the type of financial harm that led to the Great Recession from ever happening again."
Not everyone feels that way about the law, known as Dodd-Frank after its Democratic sponsors, Massachusetts Rep. Barney Frank and Connecticut Sen. Christopher Dodd.
Republican House Financial Services Committee Chairman Jeb Hensarling, an early opponent of Dodd-Frank, dismissed Obama's meeting with the regulators, saying, "Much like Obamacare, Dodd-Frank is an incomprehensively complex piece of legislation that is harmful to our floundering economy and in dire need of repeal."
The law set up a council of regulators to be on the lookout for risks across the finance system. It also created an independent consumer financial protection bureau within the Federal Reserve to write and enforce new regulations covering lending and credit. And it placed shadow financial markets that previously escaped the oversight of regulators under new scrutiny, giving the government new powers to break up companies that regulators believe threaten the economy.
But because of the complexity of the industry, the law gave regulators extended time to write the new rules that would enforce its provisions.
So far, regulators have missed 60 percent of the rule-making deadlines, according to an analysis by the law firm of Davis Polk, which has been tracking progress on the bill. Even so, the rules are so complicated that the ones already written have filled about 13,800 pages, compared with the 848 pages in the law itself.
"I would have to give it a mediocre grade at this point," said Sheila Bair, the former chair of the Federal Deposit Insurance Corp. "Most of the rules have not been finalized. A lot of them haven't even been proposed yet. When some of the rules have been proposed, they're highly complicated, they're riddled with exceptions, they're watered down."
Dennis Kelleher, president of Better Markets Inc., a bank watchdog group, said Obama needs to hold monthly meetings with regulators and fight for more money for the financial regulators to do their job.
"Only that level of consistent presidential leadership and involvement will turn the tide against Wall Street's relentless attacks, which is what has killed, weakened and delayed so much of financial reform," Kelleher said.
A key goal of the legislation was to prevent a rebuilding of a financial system that would permit banks to become so huge and intertwined that they would be "too big to fail." But the nation's top banks today are bigger than they were in 2008. A key proposal in the law would restrict banks from trading for their own profit, a practice known as proprietary trading. That rule, named after former Federal Reserve Chairman Paul Volcker, has yet to take effect and the current proposal has been weakened from what the law initially envisioned.
Annette Nazareth, a former Securities and Exchange commissioner who is now a partner at Davis Polk, said that when it comes to the Volcker rule, the law requires that various regulators write a single rule that applies to all the regulated financial entities. "So to some extent it's not surprising that it has taken longer when they have had to reach consensus on some very tough issues," she said.
Overall, she added, "we are in a better position than we were before the financial crisis." She said banks have stronger capital positions, regulators are more aggressive and failing banks can be dismantled in ways they couldn't before. "We have the building blocks for a better, more stable financial system."
Action has varied from agency to agency. The Commodity Futures Trading Commission, for example, has been criticized for moving so swiftly on rules that it has had to issue an unusual number of so-called "no action" letters relieving firms that it oversees from the regulations.
Other central elements of the law have fallen into place.
The Senate last month confirmed Richard Cordray as the director of the Consumer Financial Protection Bureau created by the law. Republicans had been blocking his confirmation and demanding broad changes in how the bureau was configured and how it obtained its finances. But a number of Senate Republicans withdrew their opposition, putting Cordray in place and removing one element of uncertainty that had clouded the bureau's work.
The Federal Reserve last month raised the amount of capital that big banks must hold to reduce the threat they might pose to the broader financial system. The requirements, which meet international standards agreed to after the downturn, have met some resistance from financial institutions as being too high, but have also been criticized for not being high enough.
"There is a trade-off between holding capital and the ability to lend," said Scott Talbott, a senior lobbyist for the Financial Services Roundtable. "Our concern is that as you take a look at all the regulations in totality, you will decrease the banks' ability to help the economy."
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