In the first year after passing the Dodd-Frank Act, regulators made progress implementing the law. But now, it seems, things have ground to a halt.

As they face some of the most complex pieces of the overhaul, the agencies now have a Goldilocks complex: they're trying to get the new regulatory system just right. They want rules to be tough, but not so much so that they stop business. And they are well aware that an industry facing an uncertain regulatory future is watching their every move.

"They know they are very much under a microscope and that they have to deliver," said Amy Friend, a managing director at Promontory Financial who worked for Sen. Chris Dodd while the law was being drafted. "That means they are going to be extra deliberate about what they're doing."

On Dodd-Frank's second anniversary, scores of rules that the law had mandated to be completed at this point are still uncompleted. They include 121 rulemakings with pending proposals, and 19 rules that have not even been proposed, according to analysis by the law firm Davis Polk & Wardwell.

Observers say a large part of the challenge is implementing a broad, general framework that Congress created without including key details.

"The regulators were handed a monumental task" with "deadlines that were impossible and random," said Margaret Tahyar, a partner at Davis Polk. "This was more than just filling in a few details. There were major components of the architecture that weren't there."

In the first 12 months following enactment, the regulators were able to implement projects with earlier deadlines, such as reforms to deposit insurance pricing and the closing of the Office of Thrift Supervision. But more far-reaching provisions are still in limbo. Regulations to ban banks' proprietary trading, institute requirements for securitizers to retain risk and force lenders to ensure mortgage borrowers' ability to repay were all proposed, but none have been finalized. And while the new Financial Stability Oversight Council has outlined its procedures for designating systemically important firms, no such firms have yet been designated.

It is not a lack of urgency stalling the rulemakings, many say. Instead, with the reality setting in of the magnitude and implications of many Dodd-Frank reforms, regulators have swapped immediacy for measured caution. For instance, regulators appear to want to carefully consider the thousands of comment letters they have received on their existing proposals, even if it means taking more time.

"When Dodd-Frank was passed, it wasn't passed with a lot of input at all from the industry," said Deborah Bailey, director at Deloitte & Touche and a former deputy director of the banking supervision and regulation division at the Federal Reserve Board. "Traditionally, financial legislation has been done in a way where not only regulators were involved in it, but the industry [too]. So you had industry input into the legislation to make sure that there weren't any unintended consequences associated with the laws that were passed."

But there have been other impediments to the regulators moving quickly. Different agencies that must collaborate on rules have competing priorities.

Some regulators have dealt with holdups in Senate confirmation of senior positions, and then the eventual change of leadership when a principal is confirmed. Agencies are also dealing with fewer budgetary resources.

"You've got these agencies that not only have their requirements to promulgate all of these rules, but they also have the same responsibilities to continue to oversee and supervise financial institutions and examinations and also finalize all of the things on Basel," Bailey said.

1 Step Forward, 2 Steps Back
To be sure, some strides have been made over the past year. "When we look at where we were two years ago - '08, '09 - we were really on the brink," said Cyrus Amir-Mokri, the assistant Treasury secretary for financial institutions. "Our banks didn't have enough capital. Our regulatory system was very fractured in that we didn't have any coordinating mechanisms. We didn't understand products. We didn't even have good documentation for a lot of these complex products that people were dealing with. All of that has changed. It's a work in progress, but the direction has been set, and I think that's very important to understand."

But even some of the triumphs came after the deadlines set by Dodd-Frank. For example, in December regulators unveiled a package of proposed rules to dictate how much capital banks with assets of $50 billion must hold. But given continuing discussions in the Basel Committee on Banking Supervision on international standards, they punted on certain aspects like liquidity requirements. There is still no final rule in place.

Also, President Obama bypassed Congress to name Richard Cordray head of the Consumer Financial Protection Bureau, a move that is currently being challenged. Nine of the largest banks submitted their initial so-called living wills, plans that would detail how an individual firm would be unwound in the event of a disastrous episode. But those plans provided scant details to the public. More than two dozen living-will plans are due by firms over the next year and a half.

Finally, regulators have made little headway on other key elements of the regulatory reform effort. For example, there is no clearer path ahead now on the Volcker Rule than last year, with regulators saying they need more time to complete a final rule.

Meanwhile, regulators find themselves in a highly politicized environment - months before a big election - in which they receive myriad mixed signals.

"I think what you want the regulatory staff to do is put their heads down and do the right thing. That means listening to their colleagues, having this very healthy back-and-forth, entertaining comments that come in, and being very deliberate about what they're doing," said Friend. "But I don't think you want them to be whipsawed by all the public pronouncements about all the rules."

Mass of Uncertainty
As a result, observers say regulators have done as well as can be expected given the circumstances. Still, some criticize the release of proposals that are too difficult to understand.

Rep. Shelley Moore Capito, R-W.Va., who chairs the House Financial Services financial institutions and consumer credit subcommittee, said the vagueness of provisions in the legislation is largely to blame.

"It's just a mass of ill-defined and nonspecific regulations with onerous penalties, and so it leads to a lot of uncertainty," Capito said.

Some said momentum for the Dodd-Frank implementation project may simply be on the decline two years later.

Friend said it was inconceivable for regulators to continue at their breakneck pace they followed in the first year.

"There was such tremendous pressure on all of them to get out of the box really quickly and I think the pace at which they were approaching regulation was just unsustainable," Friend said. "So in the second year, they've slowed down."

Others said it would be a mistake to move too quickly to complete such an intricate process while the regulators must continue handling their normal supervisory responsibilities.

"The criticism of the regulators being too slow is totally unwarranted," said H. Rodgin Cohen, a partner at Sullivan & Cromwell. "It should be in everybody's interest that they get it right and that takes time and effort because there are many, many complex issues. The regulators have been moving at an appropriate and measured pace. Frankly, if they were moving more quickly there would be less time to comment; there would be less time for a deliberative process at the agencies."

Rep. Barney Frank, D-Mass., the half-namesake of the reform law, agreed, and played down the missed deadlines.

"The deadlines were not firm in the sense they were basically approximations," Frank said. "Progress is going forward. I'm satisfied. The point is nothing has been undone, and nothing negative has happened because the regulations weren't in place."

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