Dodd-Frank act: After 3 years, a long to-do list

• Dodd-Frank Wall Street Reform and Consumer Act is a delayed work-in-progress
• Well-funded opposition of the finance-industry lobby is behind delays
• Along with regulators%2C the financial industry has used courts to attack Dodd-Frank

Editor's note: The information in the graphic above was updated on Sept. 11, 2013.

On Feb. 8, 2012, five days before the deadline for public comment on a proposal that threatened to slice profits for Wall Street's biggest banks, the financial industry massed in Washington, D.C.

Bankers, lawyers and consultants met with regulators in nine sessions at the Securities and Exchange Commission (SEC) and other regulatory offices around the Capitol, voicing concern the provision would unduly restrict the industry.

The push back succeeded. The "Volcker Rule," named after former Federal Reserve chairman Paul Volcker, remains unfinished and long behind schedule today.

Its status epitomizes the delayed work-in-progress condition of much of the landmark Dodd-Frank Wall Street Reform and Consumer Act, a sweeping measure that was supposed to turn the lessons of the 2008 financial crisis into law and prevent another devastating recurrence. About two-thirds of the package's rule-making deadlines have been missed as its third anniversary nears in July.

The reasons behind that delay are a testament to the well-funded opposition of the finance-industry lobby, plus legal battles and resistance in Congress. The lag also owes partly to the challenges the 848-page bill poses for a regulatory system in which multiple federal agencies with sometimes conflicting views are tasked with shepherding the complex legislation into final rules.

As for the Volcker Rule, one of Dodd-Frank's most contested proposals, roughly 85% of 253 Washington meetings with regulators since they issued the provision in late 2011 featured finance industry representatives challenging it, a USA TODAY review of electronic meeting logs shows.

"This stuff doesn't get any better with time," said former Federal Deposit Insurance Corp. (FDIC) chairman Sheila Bair, a key figure in the Dodd-Frank approval process before leaving office. "The longer you wait to finalize the rules, the more they get watered down, the more exceptions that get built in, people's memories about the crisis start to fade and the pressure isn't there."

Indeed, this week regulators are edging toward requiring stronger oversight of large, non-bank financial firms such as American International Group and imposing stricter rules on the money-market fund industry. Weaknesses in both areas played roles in the national financial crisis.

COSTS OF DELAY

Dodd-Frank, the broadest financial reform since the 1930s, covers financial institutions and business practices that affect every American, from domestic and foreign banks to insurance firms, mortgages, the credit card industry and more.

It contains roughly 1,500 provisions, including about 398 rule-making requirements, said Gabriel Rosenberg, an attorney at Davis Polk & Wardwell, a New York-based law firm that tracks Dodd-Frank rule-making progress. In all, 279 deadlines for finalized rules had passed as of June 3, the law firm's tallies show.

Nearly 63% of those deadlines were missed, while just over 37% were met with finalized rules, according to the law firm. The update also showed regulators haven't issued proposals for 64 of the 175 rules with missed deadlines.

Barney Frank, the former House Democrat from Massachusetts whose name is on the legislation, said the rule-finalization process "has been slower than we anticipated." But, he added, "I think they will be in place in time" before another crisis.

'TOO BIG TO FAIL' STILL LIVES

Arguably, the biggest missing piece so far involves ending too-big-to-fail — an expectation that some of the largest U.S. banks and financial firms are so interconnected and economically vital that the federal government will save them from collapse.

Recently proposed Senate legislation would try to address the issue by requiring megabanks to hold more capital and limiting any federal safety net to traditional banking activities, such as taking deposits and making loans. The likelihood of full approval is unclear.

"They really have not addressed systemic stability in a meaningful way," Nobel Prize-winning economist Joseph Stiglitz said of too-big-to-fail during a recent interview at his Columbia University office.

Along with swarming regulators, the financial industry has used courts to attack Dodd-Frank. In some cases, they hired attorney Eugene Scalia, son of Supreme Court Justice Antonin Scalia, to lead the legal charge.

Two influential financial industry groups sued the Commodity Futures Trading Commission (CFTC) in 2011 after the agency adopted a rule that set limits on derivatives contracts. A derivative is a security whose value is linked to an underlying asset, rate or index. Unregulated trading of derivatives, such as those tied to mortgage-backed securities, was a major contributor to the financial crisis.

In September, the Washington, D.C., federal district court blocked the new rule on grounds that regulators "fundamentally misunderstood and failed to recognize the ambiguities" in Dodd-Frank. The CFTC has appealed.

In a separate 2011 ruling, the federal appeals court in Washington overturned SEC approval of a Dodd-Frank provision that would require publicly traded firms to tell stockholders about shareholder-nominated candidates for director boards. The court ruled the SEC did not adequately weigh the potential impact on firms' "efficiency, competition and capital formation."

CONGRESS TAKES UP AMENDMENTS

Efforts to roll back Dodd-Frank have also surfaced on Capitol Hill. The House Agriculture Committee in March approved seven amendments to provisions regulating derivatives and financial swaps. A swap is the exchange of one security for another to adjust the maturity date. The House Financial Services Committee approved three similar derivatives bills last month.

On average, committee members who voted for one of the amendments received 7.8 times as much in campaign contributions from the nation's four largest commercial banks than members who voted against, according to MapLight, a non-profit that tracks money's influence on politics.

Agriculture Committee Chairman Rep. Frank Lucas, R-Okla., said that without the changes, the regulations "could deter businesses from hedging against risk, which is contrary to the purpose of financial reform."

But Dennis Kelleher, CEO of Better Markets, a public-interest group that backs stricter financial oversight, argues the changes would "gut" financial reform of derivatives.

The Senate isn't expected to approve the House actions. But Dodd-Frank supporters fear the votes could be a harbinger. "We expected that it would be hard to keep what we'd won and do more going forward. It's been slower and harder than we'd hoped," said Lisa Donner, executive director of Americans for Financial Reform.

The White House and Congress didn't streamline or consolidate the regulatory agencies in charge of Dodd-Frank rule-making. Some provisions require approval of multiple agencies, whose members at times disagree on legal points and nuances.

Some of the disagreements have delayed changes for weeks or months, former Fed chairman Paul Volcker said during a March speech at the National Association for Business Economics. "You cannot operate an effective regulatory system this way," he said.

MEETING LOGS SHOW INDUSTRY'S CLOUT

USA TODAY reviewed regulators' meeting logs with outside parties on the Volcker Rule to get a glimpse of the high-stakes wrangling that has kept it and many other parts of Dodd-Frank reform package from being put into effect.

The review covered electronic records of lobbying disclosure reports, plus meetings that five regulatory agencies and the Treasury Department held with outside groups or individuals after the agencies issued a draft rule for public comment in October 2011.

The Volcker Rule would generally ban proprietary trading, risky but often profitable transactions in which banks use federally insured deposits and other funds to trade for their own accounts instead of for clients. It would also cap banks' total investments in hedge funds and private-equity funds. Ratings agency Standard & Poor's last year estimated the rule collectively could cost U.S. banks as much as $10 billion annually.

Banks and Wall Street argue it can be hard to differentiate proprietary trading from more ordinary transactions such as those that involve market-making, the process of making it easier for clients to buy or sell stock.

Senate records show the American Bankers Association, Bank of America, JPMorgan Chase, Goldman Sachs, Met Life, Allstate Insurance and related industry companies and organizations were among those that reported they lobbied Congress, regulatory agencies or both on the Volcker Rule and other issues.

The handful of watchdog groups that reported similar lobbying included Public Citizen and the U.S. Public Interest Research Group, the records show. It's impossible to determine how much the lobbying efforts cost, because federal lobbying disclosure rules don't require itemized expenses by issue.

The meeting logs show a similar imbalance. Kimberly Krawiec,

a Duke University law professor, analyzed meetings with the agencies for the months before they issued the Volcker Rule draft in late 2011. She found banks, financial institutions and affiliates accounted for 93% of the regulatory meetings during this period. Public interest groups, research, watchdog and labor groups were involved in 7%, Krawiec found.

Following that research, USA TODAY examined online records of meetings after the Volcker Rule was issued and regulators sought public comment. The examination documented a mismatch then, too.

Representatives of the Securities Industry and Financial Markets Association (SIFMA), an organization that represents hundreds of banks, securities firms and asset managers, accounted for at least 17 meetings in which agendas included Volcker Rule talks.

During an April 2012 meeting with FDIC counsel Gregory Feder, SIFMA representatives submitted a presentation that argued the proposal was too restrictive on loan selling and the bundling of loans into securities — another contributor to the financial collapse.

Representatives of investment bank Goldman Sachs attended at least 21 meetings from November 2011 through January 2013, the logs show. In one session, Goldman Sachs CEO Lloyd Blankfein joined JPMorgan Chase CEO Jamie Dimon and top executives of other banks in talks with Deputy Treasury Secretary Neal Wolin.

Better Markets accounted for six meetings with regulators, the logs showed. During a June 2012 meeting with staffers from several SEC divisions, the group said regulators must "break the link between proprietary trading and banker bonuses" and "create an effective enforcement mechanism to deter all forms of evasion."

Kenneth Bentsen, SIFMA's acting president and CEO, said the meetings represent active American democracy, where "everybody has a voice and they're able to have their voice heard."

"Our members have a vested interest, no doubt, because they're going to have to comply with it (Dodd-Frank). But they also have a tremendous amount of market expertise, and so I think it's beneficial for our members not only to exercise their voice, as is their right and responsibility, but in addition to bring their expertise to bear to the process," said Bentsen.

But former senator Ted Kaufman, the Delaware Democrat who helped oversee federal bailouts after the financial crisis, said "financial groups have the money and the influence to overwhelm the (regulatory) process."

They've used those resources, said Kelleher, the Better Markets CEO. "Some version of some paid mouthpiece of Wall Street is at virtually every regulator every hour the regulator is open," he said.

Groups that support Dodd-Frank rules have tried to counter finance industry arguments by researching the proposals and submitting comment letters to the regulatory agencies. One group, Occupy the SEC, filed a February lawsuit aimed at forcing regulators to finalize the Volcker Rule.

Akshat Tewary, an attorney for the group, said in an interview that Wall Street has continued risky practices amid the Dodd-Frank delays. In their recently published book, Wall Street Values, authors and business school professors Michael Santoro and Ronald Strauss argue that even final Dodd-Frank rules won't avert another crisis unless Wall Street's ethics are aligned with not just market efficiency but the greater "public welfare."

"We had a system that was broken ... and the fundamentals within that system haven't changed," said Neil Barofsky, the former inspector general who oversaw spending of federal bailout funds. "The question is not if" the U.S. faces another financial disaster, he warned, "it's when."