WASHINGTON — The omission of improvements to the regulatory structure in the Dodd-Frank Act was an oversight that needs to be corrected, Paul Volcker said Monday.

On the same day his Volcker Alliance think tank proposed a major overhaul of the U.S. regulatory system, the former Federal Reserve Board chairman said the heavy lifting that had been required to reform financial services practices in the reform law left little time back then to resolve outstanding jurisdictional flaws.

"Now it is time to come back and repair that lapse," Volcker said at a press conference where the report was released.

The group, which Volcker chairs, proposed a blueprint for consolidating the U.S. regulatory system along the lines of the United Kingdom's structure. Rather than the current hodgepodge of regulators that share responsibility for overseeing the financial services system, the regulatory system would be divided into three functions: policymaking, supervision and the capital markets.

"The banks are the first to complain of the multiplicity of agencies and the overlaps and gaps," Volcker said during a press conference following the release of the report. "We address a major part of their concerns, now whether they like the way we have done that, I don't know."

While industry observers were still in the process of hashing out the plan Monday, some were split over whether the proposal would go very far.

"There is value in asking the question," said Wayne Abernathy, executive vice president at the American Bankers Association, on whether the regulatory system needs rewiring.

But Abernathy questioned an aspect of the plan that appeared to give more power to the Federal Reserve Board.

Under Volcker's proposal, the sitting Fed chair would chair a new division within the Financial Stability Oversight Council — the Systemic Issue Committee — that would craft prudential standards for the biggest companies. The Fed's vice chair would chair the new Prudential Supervisory Authority, which would fulfill the supervision component, and the central bank would issue rules for institutions supervised by the PSA.

"The Fed is already struggling to maintain its independence given all the power that has been given to it," Abernathy said. "How is it possible at all with this [power] all going to the Fed, for the Fed ever to maintain its political independence?"

But others said the proposal is valuable in beginning a conversation about how to fix the current regulatory overlap.

"The Volcker Alliance is right that we need regulatory consolidation and tough oversight across the financial sector," said Michael Barr, a University of Michigan law professor, who was a key Treasury Department official during the 2010 reform push. "There are a variety of ways of getting there, and this report should provide further impetus for reform."

The Volcker Alliance plan would also merge the Securities and Exchange Commission and the Commodity Futures Trading Commission.

"This is a fractured regulatory system," Volcker said. "A system that was built up piecemeal has never had a good overall look, but nobody has ever done anything to make it more consistent and effective."

Enacting such a drastic shake-up would likely require a prolonged congressional fight and it is uncertain if there would be enough political will to follow through with such a plan. Indeed, as the group's report pointed out, there have been 25 proposals since World War II to restructure the regulatory system with very little success.

But Volcker said given the events of the recent financial crisis, Congress has "more provocation in my view to act now given what has happened than they have had before."

Dodd-Frank did rework some of the regulatory infrastructure, including the creation of the FSOC and the Office of Financial Research, and the elimination of the Office of Thrift Supervision. The law also established the Consumer Financial Protection Bureau to oversee compliance policies for both banks and nonbanks.

While further changes were discussed in the run-up to the bill's passage — including a proposed merger of the SEC and CFTC — they were all abandoned in large part due to political obstacles.

But Abernathy said he still doubts there would be willingness to take up the issue in Congress. "It is the kind of thing everybody loves to talk about and chat about, but nobody wants to expend the blood that would be required to move all these boxes around," he said.

Abernathy added that while the current regulatory system is complex, its structure has responded to the unique attributes of the U.S. financial industry.

"That isn't to say that there shouldn't be some adjustments to the system we have, but understand the system we have evolved as our economic system evolved and it kind of matches our very diverse financial system," he said.

While the Volcker Alliance report might not lead to immediate action, Volcker said, "I do think we can stir up some action.

"This is not an ideological issue; it is a kind of technocratic issue, but it is an important issue."

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