There was much talk of consolidating these turf-conscious bureaus at the time Congress was working on Dodd-Frank; the bill's failure to do so looks more unfortunate with each passing day. The byzantine process favors the banks, which have the motivation and the money to send lawyers and lobbyists into every bureaucratic cranny, doing their best to dilute and delay the impact of Dodd-Frank.
Yet Dodd-Frank presents genuinely difficult substantive issues that would have challenged the nimblest regulatory apparatus. Case in point: the Volcker Rule, the law's command that federally insured banks no longer engage in securities trading on their own account. Though not a major cause of the 2008 crash, such "proprietary trading," conducted with the funding advantage banks enjoy because of federal deposit insurance, is a potential source of instability.
The rule's namesake, former Federal Reserve chairman Paul Volcker, and others persuaded the framers of Dodd-Frank to limit commercial banks to taking deposits and making loans, leaving uninsured investment banks, hedge funds and private equity to handle riskier stuff with no expectation, implicit or otherwise, of a federal bailout.
Neat in theory, the Volcker Rule has proved hideously complex in rule-making practice. Among the line-drawing problems is distinguishing speculative bets from more mundane "market making," in which banks buy and sell securities as a go-between for clients.
Another sticking point: the scope of a proposed exception that would let banks trade ostensibly safe U.S. Treasury bonds and municipal bonds, so as to hold down marketing costs for federal, state and local governments. Foreign nations, notably Canada, protested the exception should cover their bonds, too.
If regulators can't write a proprietary trading definition that's sufficiently fine-grained and enforceable, perhaps they should draft a broad one, enforced by holding bank executives and boards personally accountable for compliance.