WASHINGTON — Three years after President Obama signed a sweeping overhaul of lending and high-finance rules, execution of the law is behind schedule with scores of regulations yet to be written, let alone enforced. Meeting privately with the nation’s top financial regulators on Monday, Obama prodded them to act more swiftly.
The president’s push comes as the five-year anniversary of the nation’s financial near-meltdown approaches. The law, when passed in 2010, was considered a milestone in Obama’s presidency, a robust response to the crisis that led to a massive government bailout to stabilize the financial markets.
But the slow pace of implementation has prompted administration concern that banks could still pose potentially calamitous risks to the economy and to taxpayers. Obama hoped to convey “the sense of urgency that he feels,” spokesman Josh Earnest said before the president convened the meeting with the eight independent regulators in the White House Roosevelt Room.
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 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, Rep. Barney Frank and 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 incomprehensibly complex piece of legislation that is harmful to our floundering economy and in dire need of repeal.”
Three years after passage, many other Republican lawmakers also see the law as more negative than positive.
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 that have already been written have filled about 13,800 pages of regulations, compared to the 848 pages it took to write 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 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.”
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.