Washington (MarketWatch) — Senators will be questioning top officials of the Securities and Exchange Commission and Commodity Futures Trading Commission on Tuesday about whether implementation of the Dodd-Frank Wall Street reform law is moving too slowly as it moves into its third year.
The SEC and CFTC officials will testify to the Senate Banking, Housing and Urban Affair Committee regarding derivatives and the Volcker rule.
“Derivatives are generally one of the very, very big issues,” said Michael Greenberger, former director of trading and markets at the CFTC, adding that there is heightening controversy regarding derivatives trading outside of U.S. boundaries.
The Volcker rule will limit and separate the bank investment and trading activity from consumer lending arms. While some worry about the scope of the rules themselves, the slow pace of the law’s progress concerns market participants and regulators.
Mary Kopczynski, a New York-based financial regulatory expert, said her clients want to hear a stricter timeline for Volcker rule finalization and implementation. “They want a decision,” she said. “I don’t know if they’re going to get it yet.”
Behzad Gohari, a securities lawyer in Washington, said the fact that only 40% of Dodd-Frank rules are in place is “a reflection of the fact that these agencies don’t have the manpower and budgets necessary to implement their mandates.”
He said that while many may have specific qualms with the rules themselves, he mostly wants to see implementation “rapidly, efficiently and in a manner that’s beneficial.”
To date, nearly 40% of Dodd-Frank rules have been finalized, reported New York-based law firm Davis Polk. To understand the scope of control both agencies have over rulemaking, 14,000 pages of Dodd-Frank rules have been written to date, and the SEC and CFTC combined have written more than 8,000 of these pages, David Polk reported.
Both agencies have significant control over the Volcker rule. And while some are dissatisfied with the slow pace of reform, “the pace of rulemaking has been remarkably consistent over the past three years,” Davis Polk reported.
But there is one other thing that might complicate the implementation of the Volcker rule this year.
Massachusetts Democratic Sen. Elizabeth Warren and Arizona Republican Sen. John McCain have been advocating for an update to the 21st Glass-Steagall Act to separate “boring banking” – or taking deposits for making loans – and investment banking.
This goes much further than the Volcker rule in restrictions and may draw out the conversation longer.
“It will certainly be a subject of this hearing,” Greenberger said. “If for no other reason, Elizabeth Warren will bring it up.”