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So, here we are, one year later, and still trying to get our collective heads around the complexity introduced by the Dodd-Frank Act. So, how’s progress? Well, let’s take a quick look at the numbers. As of July 27th, the CFTC had finalized 11 out of the 47 rules required, only 23% of the way there. The SEC is fairing at about the same rate of finalization. Now it is important to note that we’re primarily talking about Title VII of the DFA; other sections of the law haven’t had a stellar rule adoption rate either. This raises the question, “Shouldn’t more of the key moving parts be in place by now?”
What Is Taking So Long, Anyway?
We’ve recently seen a level of Washington partisanship push us near to default status on our debt, so it should come as no surprise that legislation like the Dodd-Frank Act would inspire a predominantly divisive environment. There are many bills that were recently introduced in Congress that hope to redact sections of DFA, not to mention the budget cuts that are planned for the regulatory bodies. More with less seems to be the Congressional mantra.
To add to the legislative distress, President Obama is having a difficult time getting a new director to head up the Consumer Financial Protection Bureau. In mid July, he nominated former Ohio Attorney General Richard Cordray to the post. This nomination came when it was clear that Elizabeth Warren, the bureau’s acting director, was not going to get Senate approval to a permanent post. Senate Republicans are not likely to back Mr. Cordray’s nomination either. In fact, they don’t even want a director at all. They would rather have the bureau headed by a bipartisan five-member board. Without a director, the CFPB cannot enact any rules.
If you caught the Daily Show on Comedy Central last week, there was a segment spoofing the Schoolhouse Rock cartoon “I’m Just a Bill”, where John Oliver portrays a very battered Dodd-Frank Bill. Yeah, it’s funny, but sadly, it does illustrate some of the real problems that DFA faces, and quite possibly why we are witnessing such a slow rollout.
Hurry Up and Wait
With the CFTC and SEC both acknowledging the need to extend some deadlines along with their power to do so, it is apparent that we won’t see significant OTC regulation until the year end. We will also see much of the implementation moving in through calendar year 2012. CFTC Chairman Gary Gensler has stated on more than one occasion that it is important to get this right. Overall, I believe, that the CFTC has made reasonable attempts to acquire industry guidance and input throughout the rulemaking process. Perhaps this is a major contributing factor for some of the delays. I do, however, question the order in which the rules were proposed. I would have thought that the regulators would have tackled the bulk of the definitions first, but that’s just my view.
So, Happy First Birthday, DFA!
(What do you get a one-year old that needs everything?)