WASHINGTON — It appears the best way to broker a compromise on a hot-button issue in the regulatory reform bill is to study it.
That, at least, is the approach taken in Senate Banking Committee Chairman Chris Dodd's 1,300-plus-page bill, which includes more than two dozen studies on topics from industrial loan companies to contingent capital to the implementation of the Volcker Rule.
The sheer number of topics to be studied underlines how intricate many of the issues are and reflects lawmakers' desire to deal with them sometime in the future.
"Doing a study on it is just an absolute dodging of the issue," said Mark Calabria, director of financial regulation studies for the Cato Institute. "We can't get an agreement, we think this might be an important issue, so we'll do a study and we'll talk about the study when it comes out. It just kicks it down the road for a little bit longer."
In most cases, the studies could take as long as a year, if not more, according to a compilation prepared by the Morin Center for Banking and Financial Law at Boston University. One study, on independence of credit rating agencies, would not be due for three years.
"This telegraphs a long, long process for regulatory reform," said Cornelius Hurley, a professor in the Boston University School of Law. "Most of these, if not all of them, will probably make into the final bill. Who's going to object to a study?"
Satish Kini, who co-chairs the banking group at Debevoise & Plimpton, agreed. "There's a sense that this will be a big undertaking once Congress finishes," he said.
Hurley said the number of studies is likely to grow before the bill becomes law. (The House version calls for close to 40 different studies).
"The list is only going to get longer … as more compromises are made," he said.
At least one issue — the proposed Volcker Rule — would be subject to multiple studies. The legislation's ban on proprietary trading and restrictions on investments with hedge funds and private equity would not go into effect until after a proposed interagency council completed a six-month study that defined proprietary trading and discussed how the rule would affect the safety and soundness of banks. Regulators would then have nine months to set final rules based on the council's recommendations. (The rules would not go into effect until two years later.)
During that same time period, however, the Government Accountability Office would also be examining the risks and conflicts posed by proprietary trading and its impact on the safety and soundness of the banking system.
The bill does not address what would happen if the GAO's conclusions differed from those of the oversight council, but some see the plethora of studies as a "catastrophic waste of time," as one observer put it. "Now we have another piece of busywork for regulators that will be just another excuse," said Richard Carnell, an associate professor at Fordham University School of Law.
Regulators would also be required to study all exceptions to the Bank Holding Company Act, including industrial loan companies and other specialty charters. Though the Obama administration sought to eliminate such charters outright in its regulatory reform proposal last year, lawmakers have faced a small but vocal group of defenders.
In the case of ILCs, the charter has been protected in the past by Senate Majority Leader Harry Reid, whose home state of Nevada includes many such banks, and Sen. Robert Bennett of Utah, the No. 2 Republican on the Banking Committee, whose state houses most industrial banks.