The Treasury is hitting back against critics of Dodd-Frank Act who have complained that the volume of new financial regulations and the delays in writing them are holding back lending and hurting the economy.
A recent report from the Davis-Polk law firm showed regulators have missed the deadline on 78 percent of the 400 rules and regulations required under Dodd-Frank, including 12 percent, or 25 rules, where the deadline has been missed but the rules have not even been proposed.
In response to a CNBC request for comment, a Treasury spokesman said the real uncertainty comes from those seeking to repeal the sweeping financial regulatory reform law.
“Current calls to repeal Wall Street reform are a significant cause of the uncertainty that responsible business leaders are seeking to avoid,” the spokesman said. “Once it is fully implemented, Wall Street reform will improve market certainty, strengthen the financial system, help boost the economy, and provide better protections for taxpayers.”
The Treasury also cited recent Senate testimony by Deputy Secretary Neal Wolin, who said regulators are trying to balance speed with the need for public comment and time to get it right.
“The Dodd-Frank Act is designed to help protect our economy for generations,” the spokesman said. “Many of its reforms involve some of the most complex areas of finance.”
In interviews, Davis-Polk analysts cited four key areas where progress has lagged: derivatives/swaps regulation, the Volcker rule, which prohibits proprietary trading by regulated banks, the Basel III international banking accords, and new mortgage capital rules.
For example, regulations for the Volcker rule were supposed to have been adopted in October. Yesterday, the Commodity Futures Trading Commission issued its proposed Volcker rule regulations, the last of the regulators to do so. The law takes effect in July, whether or not the agencies have implemented their final rules. The Treasury said it expects final Volcker rules to be adopted this year.
Further complicating the outlook, most Republican presidential candidates have pledged to repeal Dodd-Frank, citing it as a major impediment to economic growth.
In public comments in December, JPMorgan Chase chief Jamie Dimon said there are parts of Dodd-Frank he agrees with, but he went on to criticize certain areas of the law, especially the Volcker rule. He said it’s vital that regulators “get it right.”
“We have the deepest, widest, most transparent and best capital markets on the planet,” Dimon said. “Let's be really careful about damaging that, okay?”
He said bankers were still waiting to hear from regulators how much “skin in the game” they had to retain in their mortgage business, a reference to Dodd-Frank rules that require banks to keep a certain percentage of their home lending business on the books.
“Three years after the crisis, we don't know what qualified mortgages are. We don't know the GSEs. We don't know what the skin in the game is,” Dimon said. “It's holding back the mortgage market. I wish this was done much quicker.”
Treasury officials, for their part, say much has been accomplished already. They point to the establishment of new agencies, such as the Consumer Finance Protection Bureau and the Financial Stability Oversight Council.
They also note that the Fed has proposed sweeping new standards for the biggest banks that require them over the next several years to raise their capital levels.
Officials also note that final rules have been adopted for the liquidation of big institutions, so that there will be a process in place if the economy faces another Lehman Brothers-sized failure.