U.S. regulators said on the one-year anniversary of the Dodd-Frank financial oversight law that they are moving fast enough to give markets certainty, but slow enough to get hundreds of new rules right.
A panel of the top financial watchdogs was called before the Senate Banking Committee Thursday to provide an update on how they are carrying out the legislation designed to make markets less risky after the 2007-2009 financial crisis.
The session was a partisan display, with Republicans portraying Dodd-Frank as big government harming the economic recovery, and Democrats saying it is necessary medicine for a broken financial system.
"It has turned the financial regulatory landscape into a nightmare," said Senator Richard Shelby, the committee's top Republican.
Democratic Representative Barney Frank, co-author of the law, appeared on a first panel at the hearing and attacked Republicans for starving the regulators of the bigger budgets needed to smartly carry out the new rules.
"This nickel and diming of the SEC and CFTC I think does grave harm," Frank said of efforts to restrict money for the Securities and Exchange Commission and the Commodity Futures Trading Commission.
Regulators, for their part, said they are doing everything they can to keep pace.
A handful of regulatory agencies are writing hundreds of new rules to police the roughly $600 trillion swaps market, reduce risk at the biggest financial firms, and bring the so-called shadow banking system — which includes hedge funds and non-traditional lenders — into the traditional regulatory framework.
"While some feel we are moving too quickly and others feel we are not moving rapidly enough, I believe we are proceeding at a pace that ensures we get the rules right," said SEC Chairman Mary Schapiro in prepared testimony.
The SEC and CFTC have struggled to keep pace with the swift rulewriting timeline laid out in Dodd-Frank, and are months behind schedule on many key rules.
Recently they had to put in stop-gap protections to ensure stability in the derivatives market because some parts of the bill were due to automatically kick in on July 16, even though most of the rules on derivatives have yet to be completed.
Federal Reserve Chairman Ben Bernanke said regulators are aware of concerns that the massive amount of rulewriting could create unintended consequences.
JPMorgan Chief Executive Jamie Dimon made this case in a very public way last month when he challenged Bernanke at a televised banking conference about regulatory collateral damage.
"Has anyone bothered to study the cumulative effect of all these things?" Dimon asked.
Bernanke said in prepared testimony Thursday that any sweeping reform comes with costs and uncertainties.
"In implementing the statute, the Federal Reserve is committed to the promulgation of rules that are economically sensible, appropriately weigh costs and benefits, protect smaller community institutions, and, most important, promote the sound extension of credit in the service of economic growth and development," he said.
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