Dodd-Frank Comes Under Fire at Congressional Hearing

The Dodd-Frank Act fell under scrutiny at a hearing of the ""Senate Banking Committee"":http://banking.senate.gov/public/index.cfm?FuseAction=Home.Home Wednesday, with lawmakers from the right charging that the reform law will impose arbitrary rules that limit consumer choice and prevent an economic recovery.

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The huge $3 billion trading loss that befell ""JPMorgan Chase"":http://www.jpmorganchase.com/corporate/Home/home.htm in May hovered over much of the hearing.

Committee chairman Sen. ""Tim Johnson"":http://www.johnson.senate.gov/ (D-South Dakota) opened the hearing by saying the Chase loss ""is a clear reminder that Wall Street continues to need better risk management, vigorous oversight and, if the rules are broken, unyielding enforcement.""

""Consumer Financial Protection Bureau"":http://www.consumerfinance.gov/ (CFPB) Director Richard Cordray appeared before the committee ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô the eighteenth time a representative of the agency to do so ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô in defense of the bureau's recent moves to hire new examiners and regulate the mortgage marketplace.

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But much of the light fell on interagency efforts to finalize the controversial Volcker Rule, a rulemaking requirement under Dodd-Frank that bans short-term proprietary trading by systemically important financial institutions like Chase.

""The Volcker Rule alone is staggering in its length and complexity,"" Sen. ""Pat Toomey"":http://www.toomey.senate.gov/ (R-Pennsylvania) told regulators, vaguely referencing exceptions to the rule and rulemaking ""inventions"" by regulators. ""It's staggering. I'm concerned that it's going to limit the ability of banks to manage risk. It's going to have a huge cost. It's going to reduce liquidity in the markets.""

He said that Dodd-Frank so far includes 398 rulemaking requirements, 110 of which have been finalized by regulators, leaving nearly 300 other rules to complete or propose.

The lawmaker began a testy exchange at one point with Comptroller of the Currency ""Thomas Curry"":http://www.occ.treas.gov/about/who-we-are/comptroller-of-the-currency/bio-thomas-curry.html.

Addressing ""FDIC"":http://www.fdic.gov/ Acting Chairman ""Martin Gruenberg"":http://www.fdic.gov/about/learn/board/board.html, he said that he observed the federal regulator saying in a recent speech that ""'the typical path toward the failure of an insured bank starts with bad loans.' The biggest risk of banking is lending and the risk inherent to that process.""

When Curry said that the lending process would receive ""considerable focus,"" Toomey interrupted him by saying, ""That's what I thought. Lots of regulation. Documentation. Concentration requirements. Supervision of activities.""

Cordray said that the CFPB soon means to finalize a ""larger participants"" rule that will clarify regulatory requirements for banks and nonbanks.