Dodd-Frank Reform Act authorized the SEC and CFTC to write hundreds of new rules for Wall Street and the financial markets but they've run into a roadblock:  Republicans in Congress and others are employing a by-the-book slowdown. 

The latest prominent Republican to speak out is NJ Representative Scott Garrett.   In his letter dated 3/3/11 to CFTC Chairman Gary Gensler, Mr. Garrett complained that a “rapid pace” prevented the financial industry from fully digesting proposed rules for derivatives trading.  What's critical is that Mr. Garrett chairs the House Financial Services Committee’s capital markets panel. Mr. Garrett notes:

... there "seems to be no order in which the rules are proposed," and he cites, for instance, that the CFTC's move to set standards for derivatives dealers before defining which banks and firms would qualify as dealers.

Regulators who choose to ignore Congressional (Republican) concerns do so at their own risk.

    Congressional Roadblocks.   The Republican-led House of Reps passed a federal spending plan in February that would cut the commission’s $168 million funding by 33%.  Meanwhile, Mr. Gensler, a Democrat, has already drafted more than 50 derivatives regulations on the shoestring budget.  He faces a 7/21 deadline to finalize most of the rules, however, including proposals that would require derivatives deals to be traded on regulated exchanges.  Again, the rules - and the deadline - are mandated by Dodd-Frank.

    Rep. Garrett’s Letter to CFTC Chairman Gensler (<--click link).    Garrett posed several questions, including whether the regulator was "concerned that this pattern of rule-making, coupled with its unsustainable pace, is depriving the public of the opportunity to provide meaningful comment on the CFTC’s proposals?"  He's apparently referring to the 60-day comment period - which might be sufficient, except for the fact that ma ny of the proposals can run more than 100 pages.

In response, the CFTC has extended the comment period for most rules, and has held more than 500 meetings about Dodd-Frank with Wall Street lobbyists, financial executives and consumer advocates. The CFTC also has postponed some votes on contentious proposals, including a plan to set trading limits on corn, wheat and other agriculture products.

Regardless, the proposals are unlikely to please Republicans, no matter how long they circulate.  Republicans have been especially critical of the law’s aim to crackdown on derivatives, a major Wall Street profit center.  Mr. Garrett’s letter chided the commission for proposing rules that would prevent a bank or financial firm from owning more than 20% of any one derivatives clearinghouse.

CFTC Commissioner Jill Sommers, a Republican, questions the CFTC's ability to overcome the political obstacles.  "The aggressive deadlines Congress gave us for promulgating the Dodd-Frank rules has put regulators and market participants in the difficult position of processing a massive amount of highly complex information in a brief period of time."  She warns that confusion over the rules could force "a mass exodus from the markets due to an inability to comply with unrealistic deadlines."   [C-I Question:  Should she have used the phrase,"a mass exodus of biblical proportions?"]

We've also seen the same scenario is being played out with the SEC.  So we wait and watch.   [NYT Dealbook, 3/8]