In a statement on Thursday, Mr. Frank said that regulators should swiftly finalize and simplify the so-called Volcker Rule, which bars banks from trading with their own money rather than for clients. He called on regulators to issue a final rule by Labor Day.
Under Dodd-Frank, the sprawling regulatory overhaul, the rule was supposed to take effect on July 21. Mr. Frank said regulators should clarify “well in advance” of July “what, if any, compliance will be required between the statutory effective data and the date when a rule is issued.”
The governor of the Federal Reserve, Daniel K. Tarullo, echoed those concerns on Thursday, telling a Senate committee, “I think it’s incumbent on all the regulators to provide some guidance for firms.” He warned of the “real possibility” that regulators would miss the July 21 deadline.
A group of regulators — the Fed, the Securities and Exchange Commission, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the Commodity Futures Trading Commission — have fallen far behind schedule in writing the Volcker Rule amid a lobbying blitz from Wall Street and consumer groups.
Neither side was happy after regulators issued a draft rule last fall. The proposal spanned 300 pages and featured more than 1,000 questions for the public to address.
Consumer groups, which argue that banks should not make risky bets while the government guarantees their deposits, says that the plan was watered down. Wall Street, meanwhile, generated an all-out assault on the draft, casting it as an overly arcane proposal that threatens to crimp legitimate business.
Mr. Frank sympathized with the notion that the proposal was bloated and complex. “The agencies tried to accommodate a variety of views on implementation but the results reflected in the proposed rule are far too complex, and the final rules should be simplified significantly,” Mr. Frank said in the statement.
Named for Paul A. Volcker, the former chairman of the Federal Reserve who advocated curbs on risky Wall Street trading, the rule has emerged as one of the most controversial aspects of Dodd-Frank. In essence, it bans proprietary trading, a lucrative yet risky practice where banks trade for their own accounts.
But a debate has ensued on the exact definition of proprietary trading. The line can be blurred between proprietary trading and legitimate market-making, a practice in which banks hold securities with the purported plan to later sell them to a customer.
There is a two-year compliance period, in which banks will have the opportunity to adjust to the new regime. Mr. Frank said on Thursday that regulators should be open to tweaking the rule after this period, which he said “will be an opportunity for both the regulators and the regulated to learn from actual experience and make appropriate adjustments in the enforcement regime.”