* Senate Republicans urge slowdown on Dodd-Frank
* SEC, CFTC chiefs warn of staff, funding crunch
* Bernanke raises question on debit card fee exemption
* Penalties near from mortgage servicing review
* First hearing for Senator Johnson as committee chairman
(Adds Bair, Walsh comments)
By Sarah N. Lynch and Christopher Doering
WASHINGTON (Reuters) - Republicans escalated their
push to delay and defund the Dodd-Frank Wall Street reforms on
Thursday as top regulators warned the U.S. Senate Banking
Committee of a staff and funding crunch.
The chiefs of major agencies that are writing hundreds of
rules mandated by Dodd-Frank told the panel at a hearing that
they need more money to carry out the law, which was approved
following the 2007-2009 financial crisis.
Regulators also gave some glimpses into their thinking on
implementation of Dodd-Frank rules involving debit card fees
and subjecting large financial firms to stricter oversight, as
well as on dealing with the mortgage servicing scandal.
For investors and Wall Street, the Senate hearing
represented another act in a long-running drama that analysts
expect will lead to few, if any, changes in the Dodd-Frank
reforms due to political gridlock ahead of the 2012 elections.
"Republicans will argue in favor of extending
implementation of (Dodd-Frank) ... but these are timing issues
and won't affect the substance of the rules," said Brian
Gardner, analyst at investment firm of Keefe Bruyette & Woods.
From derivatives oversight to bank capitalization, the
financial regulation issues being debated on Capitol Hill will
also feature in a Paris meeting on Friday and Saturday of Group
of 20 finance ministers and central bank chiefs.
With international coordination of post-crisis reforms
still a serious challenge facing U.S. and EU policy-makers,
Senator Richard Shelby urged a Dodd-Frank slow-down.
"Regulators must not compound the mistakes of Dodd-Frank by
promulgating uninformed rules," said Shelby, the committee's
top Republican member, at the hearing.
Republicans and the financial industry could win delays in
implementation, said Joseph Engelhard, analyst at advisory firm
Capital Alpha Partners. "More time will be needed," he said.
Democratic Senator Tim Johnson, replacing Christopher Dodd,
presided over his first hearing as committee chairman.
Johnson pledged to defend "the letter and spirit" of the
sprawling Dodd-Frank statute, though he cautioned that its
global impact must be handled "with great care to avoid
unintended consequences that could impair economic growth."
HEAVY LOAD FOR REGULATORS
Dodd-Frank was written and passed by congressional
Democrats and signed into law by President Barack Obama over
the fierce opposition of Republicans and Wall Street.
With 2012 elections looming and campaign donations from the
financial industry rolling in, Republicans are pressing to trim
back Dodd-Frank at the funding and administrative levels, with
legislative changes seen as unlikely to gain much traction.
House Republicans -- pursuing dual goals of combating the
federal deficit and undermining reforms that they continue to
oppose -- want to restrain financial regulators' budgets.
The U.S. Securities and Exchange Commission is feeling the
pain of budget constraints, said SEC Chairman Mary Schapiro.
"We have delayed very significant technology projects that
would help bring the SEC's technology up," she said.
Commodity Futures Trading Commission Chairman Gary Gensler
said: "It's a little bit daunting to ask for more money for
this agency at this time, but I really do think this a good
investment for the American public."
Touching on a Dodd-Frank rule that restricts debit card
fees, an issue of concern to banks and card groups such as Visa
Inc, Federal Reserve Chairman Ben Bernanke told the panel a
small-bank exemption from the fee may pose problems.
"It is possible the exemption will not be effective in the
market place," Bernanke said.
Going a step further, Federal Deposit Insurance Corp
Chairman Sheila Bair urged more protection for small banks on
the debit card fee issue. "I do think this is a real issue and
could have an adverse impact," she said.
BAIR ON SYSTEMIC DESIGNATION
Bair also offered some insight into her inclinations which
non-bank financial companies, such as hedge funds and insurers,
should be designated as systemically important firms that would
be subject to tighter oversight by the Fed under Dodd-Frank.
Regulators are still deciding which firms should be tagged
in this way and the criteria to be used in selecting them,
other than the obvious measurement of sheer size.
"It is interconnectedness more than anything," Bair said.
"If you fail, what else happens? Who else gets hurt? ... There
will be some gray areas. At least in terms of resolution
planning I would err on the side of inclusiveness."
On another front, John Walsh, acting head of the Office of
the Comptroller of the Currency, said regulators are closer to
meting out punishments of mortgage servicers after an
investigation found deficiencies with home foreclosures.
"We are getting to the point where we will be delivering
documents to the banks and talking about civil ... penalties,"
Walsh told the banking committee.
Mortgage services that were reviewed included Bank of
America, Citibank, JPMorgan, and Wells Fargo, among others.
(Additional reporting by Dave Clarke, with Maria Aspan in New
York; Writing by Kevin Drawbaugh; Editing by Tim Dobbyn)
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