Senators look to ease Volcker Rule worries as deadline approaches

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Daniel Tarullo, a governor of the Federal Reserve Board, told members during the hearing it was a "real possibility" that regulators would miss that date, but said they are still trying to get it done by then.

However, he also indicated that he did not think Congress had to step in and push back the deadline, arguing that regulators had the power to keep the rule from going into effect without sufficient regulations.

"We have the authority ... to change the conformance period statute," he said, adding that the regulators charged with implementing the rule would clarify for financial institutions what exactly would happen if the deadline passes without final regulations.

Crapo, however, said he believes Congress does have a role.

"Why would we not want to try to fix the problem, and make it clear, legally, that there is not going to be the kind of disruption in our markets that could happen," he said.

That exchange came as part of a lengthy hearing devoted to the Dodd-Frank law and how it is being treated by the international financial system. Skeptics of the law have warned that the strict rules it imposes could put the U.S. financial system at a disadvantage, as global firms could concentrate their trading activity in nations with more lax requirements.

"The more aggressively you regulate ... the more tempting it is for someone to just say, 'See you around. We don't have to be in the United States,'" Sen. Mike Johanns (R-Neb.) said.

The hearing was particularly timely, following the disclosure by Deutsche Bank that it had restructured its U.S. operations so that it was no longer a bank holding company in America and therefore not subject to higher capital requirements set by Dodd-Frank. Barclays International has also followed this strategy.

While the regulators gathered at the hearing acknowledged that other nations have not adopted the same regulatory overhaul following the financial crisis, doing so has allowed the United States to take the lead in establishing a new global regulatory framework.

"By moving forward with this framework, we really set the terms for the international debate and to move other countries to our framework," said Lael Brainerd, the Treasury Department's under secretary for international affairs. “If we had not, we would have been on the defensive and reacting to their proposals."