The Dodd-Frank financial reform bill can't find much love these days. Three years after it was signed into law—and with only about 20 percent of its rules in place—critics and even supporters of the regulation say they find it flawed and convoluted.
"It had some good ideas when it first passed but it's pretty much a failure," said Kurt Schacht, managing director of standards and finance market integrity at CFA Institute, an association of investment professionals.
"It's confusing, to say the least, and the rules keep changing," Schacht said. "The financial industry keeps pushing back on the rules and trying to get them changed. It's a mess."
Helping to make Schacht's point was action last month in the Financial Services Committee in the House of Representatives.
The committee voted to alter a rule in Dodd-Frank that in essence prohibited the government from bailing out federally insured banks that engaged in swaps trading—customized trading of contracts between two parties in over-the-counter trading. Certain banks could get government bailout funds for such activity. (Clarification: This bill and other possible changes to Dodd-Frank have yet to be voted on by Congress.)
(Update: As it stands now, there is a clear prohibition in Dodd-Frank on bailouts for banks for losses do to swaps activity. Currently, there is no pending legislation in Congress to change that status, according to the office of Congressman Jim Hines (D-CT.)
"The swaps are complicated for Congress and anyone to really understand and these lobbyists come in and pretty much tell the politicians what to do," said Dennis McCuistion, a professor of governance issues at the University of Texas, Dallas.
"I'm a free-market guy, but we live in an era of crony capitalism," McCuistion said. "The financial industry lobbyists set up a system where they win and if they lose, the taxpayers have to pay."
Created out of the financial crisis of 2007-2009, Dodd-Frank was supposed to answer calls for reforms on Wall Street to prevent another crisis from happening. The law was initially proposed by the Obama administration in June 2009.
Revised versions were introduced in the House by then-Financial Services Committee Chairman Barney Frank (D-Mass.) and in the Senate Banking Committee by Chairman Chris Dodd (D-Conn.). Because of their heavy involvement with the law, the bill officially took on their names.
A working version of Dodd-Frank was signed into law by President Barack Obama in July 2010. It's considered a "work in progress" because many of the rules and regulations were—and are—to be defined by Congress and federal regulatory agencies.
As of now, Dodd-Frank is categorized into 16 areas and contains more than 2,000 pages. But more than 63 percent of the rules have yet to be written.
Among the many stated goals are the consolidation of regulatory agencies and a new oversight council to evaluate systemic risk in the financial markets.
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Dodd-Frank establishes a Financial Stability Oversight Council, which is designed to identify and address systemic risk, and a supporting Office of Financial Research to keep tabs on how the markets are doing and create an early warning sign if it sees trouble ahead.
All this rings hollow for David Primo, a professor of political science and business administration at the University of Rochester.
"If Congress really wanted to deal with the problems in the financial system, it would not have a disjointed regulatory process with competing and unclear jurisdictions," said Primo.
"Big banks will be able to maneuver around the complex rules with the aid of very smart lawyers and financial wizards," Primo said. "But I'm concerned that with all these exceptions being put in place for some of the rules, it will be easier for rogue bankers to create problems at the bigger banks."
One of the more contentious parts of the bill is the so called Volcker Rule, named after former Federal Reserve Chairman Paul Volcker. It called to restrict banks from making certain kinds of speculative investments that are not in the best interests of clients. But it was watered down to allow banks to invest in hedge funds and private equity funds with depositor's money.
"I'm a supporter of the Volcker Rule, but not as it's written," said Bill Isaac, senior managing director at advisory firm FTI Consulting, and former chairman of the Federal Deposit Insurance Corp.
"They've made it very complicated, and it should just say that banks should be trading with their own accounts," Isaac said. "If you are trading for customers, you're hedging, and that's wrong. Right now it's hard to tell the difference with the way the law's written."
Intent That's 'Thoughtfully Enforced'
But one expert sees Dodd-Frank working at least in some ways.
"A lot of the transparency and information flow has yet to be seen, but small steps have been taken," said Ellen Marshall, a corporate and finance lawyer and partner at Manatt, Phelps & Phillips.
"Many financial institutions have been forced to cease offering certain types of transactions to retail customers in regards to swaps and new trading platforms that have been created with more open contractual arrangements," Marshall said. "On the whole, the intent of the legislation is being thoughtfully enforced."
More enforcement could be coming. On Monday, the Financial Stability Oversight Council proposed designating American International Group, Prudential Financial and GE Capital for heightened regulatory oversight under Dodd-Frank.
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In addition, the SEC will vote on a package this week that could allow money market funds' value to float in a way that more accurately reflect the actual market value of their underlying portfolio.
Some blame the money market funds for part of the financial collapse when they dipped below their dollar asset in September of 2008. That's because money market funds were large purchasers of the commercial paper corporations used to finance their operations. That market ground to a halt, creating serious problems for the whole economy.
The money market fund industry has gone on record opposing the measure, saying that floating value funds would be difficult to sell to consumers. The financial stability council, which technically oversees the SEC, could step in and pass the money market reforms if the SEC doesn't.
"Some people believe some regulations, even imperfect ones, are better than none," said Primo. "I disagree, as it assumes that regulations are always superior to market forces. Dodd-Frank will do nothing to prevent another financial crisis."
Even those supporting regulations say Dodd-Frank will not keep "too big to fail" from happening again.
"We need sensible reforms in a fraction of the words and rules," said Isaac. "Banks need much more stronger capital reserves for one thing. That would stop some of this excess in trading."
"I wouldn't replace Dodd-Frank until we had something better," Isaac added. "But if you're expecting it to keep another financial crisis from happening, it won't. I would say that if and when the next crisis hits, it will be worse than the last one."
_ By CNBC's Mark Koba