WASHINGTON — Outrage over the Dodd-Frank Act, which has been building for months, escalated even further Wednesday at a U.S. Chamber of Commerce conference.
Leaders in the government and industry, including JPMorgan Chase & Co. chief Jamie Dimon, decried the law one by one, calling it backward and misguided.
Dimon was blunt in his assessment. While he said some provisions of the law "were rational," others, such as rules reining in the derivatives sector, were simply out of touch with reality.
"The system would be safer if we also went back to the horse and buggy," Dimon said, responding to a question about whether big-bank derivatives trading was too risky. "The quaint notion is not going to work in this world, in our great economy. There is so much misinformation about derivatives, it's astounding. They really didn't cause the problem."
A provision in the law restricting debit interchange fees, authored by Sen. Dick Durbin, D-Ill., also went too far, Dimon said.
"The Durbin amendment … just basically penalizes us for having debit card," he said. "The only thing that bothers me is they start to add up, the cumulative effect of" the law's provisions "starts to hammer us. That's what bothers me."
Dimon was not alone. Reiterating his opposition to the law, Chamber President Thomas Donohue said the law "fell far short of what the country needed."
"While Congress acted quickly it also acted in haste," he said.
However, the capital markets summit did not feature just opponents of the law. One notable exception was Elizabeth Warren, the architect behind the new Consumer Financial Protection Bureau, the Dodd-Frank product perhaps most detested by the industry. During the legislative debate, the chamber orchestrated an aggressive campaign to stop the bureau's formation.
"I've had more teasing about this meeting than I've had in a long time," Warren, who is now advising the administration on implementing the CFPB, said to the audience.
"But then, perhaps, so have you. You can imagine the analogies: Nixon to China, Daniel in the Lion's Den, Senator John Kennedy speaking before Protestant ministers. All of that's in good fun, and although I'm not here to minimize our differences."
She said the industry was wrong to think the CFPB will operate with unlimited power. The law put checks and balances in place, she pointed out.
"The CFPB is the only bank regulator — and perhaps the only agency anywhere in government — whose rules can be overruled by a group of other agencies," she said. "Let me say that again: Other agencies can veto our rules, while we cannot do the same" for them. "This is an extraordinary restraint."
In interviews, analysts said that, while angst following the law's passage was inevitable, numerous factors have made it sustained, including that an improved economy is mitigating the rhetoric that dogged the industry in the crisis.
Jaret Seiberg, an analyst for MF Global Inc.'s Washington Research Group, said the improving economy helps Dodd-Frank opposition.
"This is one of the strongest signs yet that the economy is on the road to recovery because you have lawmakers that are willing to challenge the anti-bank mantra that has dominated the political environment for the past two or three years," he said.
Others said an emboldened conservative base nationally, highlighted by the Tea Party movement, has provide ammunition to critics of the financial reform law.
"It just reflects the change in the politics. You are going from overregulated by the Obama administration to less regulation by the Tea Party," said Paul Miller, a managing director at FBR Capital Markets Corp.
"The environment is giving these guys some room to argue the government again is overstepping their mandate."
At the summit, Dimon complained that the largest banks are being blamed for the 2008 turmoil, and as a result some of the strictest measures under Dodd-Frank.
"There are reasons for big companies and small companies," he said.
"There is a reason big banks are there. … I think we're ostracized with big versus small. That's a mistake."
Donohue, meanwhile, criticized Democratic supporters of the law for pushing enactment before official findings of the Financial Crisis Inquiry Commission were released.
Congress "legislated even before its own official report on root causes of the crisis was delivered. … It simply ignored some of the most blatant root causes of the market collapse," he said.
Rep. Spencer Bachus, R-Ala., the chairman of the House Financial Services Committee, said regulators are moving too fast in implementing the law.
"Speed kills in Washington," Bachus said. "There is not a day that goes by that I don't get an email or a letter or a call from a community bank that says 'the regulators are putting us out of business.' "
Bachus directed much of his ire at the CFPB. He has introduced a bill that would replace the agency's director with a five-person board. He also supports subjecting the bureau to congressional appropriations rather than its current funding through the Federal Reserve Board.
"My objection is not to Elizabeth Warren," Bachus said to reporters. "If the president … had appointed her to a commission and she was one of five or seven people on a commission, I don't think anybody questions her commitment to consumer protection. It's just you are putting the power to judge and regulate in an almost unprecedented manner into one person, and quite frankly, as much as I respect her people skills and intellect, I have no idea what she would do. I don't know whether she would overreach, whether she would do the right thing in every occasion. But I'd much rather take five people and let their collective judgment substitute that."
