The Dodd-Frank financial regulations came under withering attack from the financial services industry at SIFMA’s annual meeting in New York yesterday, but also drew a resolute, though hardly vigorous, defense from government regulators and legislators.

The Dodd-Frank financial regulations came under withering attack from the financial services industry at SIFMA's annual meeting in New York yesterday, but also drew a resolute, though hardly vigorous, defense from government regulators and legislators.

SIFMA president and chief executive Tim Ryan drew first blood in his opening remarks. While stressing that the financial services trade organization does not support a “complete” repeal of the Wall Street Reform and Consumer Protection Act, Ryan went on to say that the financial reforms were “not working effectively or efficiently” and needed “improvements” in their implementation.

Ryan criticized the voluminous (2,300 pages by his count) new law for its “political and bureaucratic restraints” and complexity, and noted that only one-third of the required rules have been finalized to date. “It’s time to step back, review what we are trying to accomplish, and find a better approach to getting it done,” Ryan said.

SIFMA supports “comprehensive, balanced reform of financial regulation,” Ryan said, citing such areas of concern as systemic risk, capital requirements, liquidity, resolution of troubled firms, transparency, compensation and protection of retail investors.

Law’s “unrealistic deadlines”

But he went on to criticize Dodd-Frank’s “unrealistic deadlines” as encouraging “flawed processes,” as well as regulators’ “tendency towards over-reach” and the “paralysis” that he claimed was the result of regulators struggling to resolve the law’s “overlaps, conflicts and flaws.”

Ryan called for the Financial Stability Oversight Council to “take charge and sort out the current unruly mess, set priorities and move forward.” According to SIFMA, the Council’s priorities should be: making sure that no financial institutions are “too big to fail,” core derivatives reforms and rules regulating advice to retail investors.

Securities and Exchange Commission chairman Mary Schapiro, who was interviewed on stage, defended her agency’s handling of its Dodd-Frank duties, noting that it had already implemented 80 per cent of the rules it was responsible for. “Our approach is to be as thoughtful and deliberate as we can,” Schapiro said. “Clearly, there’s more to do, but we’re proceeding apace and the job is getting done.”

Schapiro: progress on fiduciary standard

Schapiro also reported that progress was being made on a highly controversial and contentious Dodd-Frank mandate, a uniform fiduciary standard for the financial services industry. The SEC is planning to issue formal requests for comment on a proposed fiduciary rule, she said, and hoped to have a proposal ready “sometime early next year.”

“The devil is in the details,” she said, “it’s not the easiest rule to write.”

Schapiro, who is rumored to be leaving as head of the commission next year, said she was disappointed that Congress has not allowed the agency to be self-funding, continuing its reliance on an annual appropriation which is often subject to political bickering. She also expressed frustration at a court ruling which struck down the SEC’s attempts to give shareholders greater proxy access to nominate board members.

But Schapiro did point to accomplishments such as increased investor confidence in the SEC, the introduction of new technology, the elimination of bureaucratic silos within the agency and a new whistle-blower program.

Greenspan: “No doubt” law will fail

Attacks on Dodd-Frank were renewed by featured speaker Alan Greenspan, the former chairman of the Federal Reserve Board. Greenspan said he “had no doubts at all” that the regulations wouldn’t work, citing the imperfections of “human nature.” The regulators operated within a “highly biased structure,” Greenspan charged. His own experience with regulation, he said, demonstrated that “if you are wrong but within the consensus, [the error] is tolerated.”

When the Ayn Rand disciple was asked why the financial markets didn’t self-regulate during the financial crisis, Greenspan responded that in retrospect he didn’t realize “how big the fat tail [a statistical distribution phenomena implying additional risk] was on the distribution of outcomes.”

Later, however, industry icon Tom James, chairman of Raymond James Financial, extended an olive branch to the regulators, urging his colleagues to “sit down with our counterparts,” or else the US markets “won’t be the best in the world.”

Industry involvement in financial regulations was critical, James said. “We’re supposed to be in the preventative business. We shouldn’t be calculating the cost of fines.”

Warner: Regulations here to stay

Fittingly, the final word on Dodd-Frank came from Mark Warner, a US senator from Virginia who helped pass the legislation.

Some things about the legislation were right and some were wrong, Warner said, “but at least we’ve moved forward.”

Any hopes the audience of financial executives might have harbored that the law would be thrown out and re-fashioned next year were quickly dashed by the Virginia Democrat.

“It’s not in the works,” Warner said. “No matter who wins.”

Saxby Chamberlain, the staunchly conservative Republican senator from Georgia who shared the stage with Warner, did not disagree.