03/01/2012 11:50 am ET

Volcker Rule Deadline Likely Blown, Says Bernanke

Here's news that will surprise no one who's been watching the tortured fights over the Volcker Rule: The controversial financial regulation is not likely to make its deadline.

Regulators are probably not going to have a version ready to implement by the July deadline, according to reports from Reuters and The Financial Times.

News of the delay comes from Federal Reserve chairman Ben Bernanke, who said during a House Financial Services Committee hearing on Wednesday that regulators will have to resolve "a lot of very difficult issues," and process "about 17,000 comments," before they can put the rule into effect.

The Volcker rule, named after former Fed chairman Paul Volcker, has emerged as one of the most contentious and closely watched provisions in the Dodd-Frank financial reform package. In its original, 10-page form, the rule called for an end to proprietary trading -- the practice of banks making speculative trades with their own money, thereby putting customers at risk -- and sought to wall off banks from having meaningful business relationships with hedge funds and private equity funds.

But the rule has grown considerably more complex since then. Advocates for the financial industry have managed to get several hundred pages' worth of exemptions and questions inserted into the text, and many analysts now believe the rule has far less power to keep banks in line than when it was originally conceived.

A number of pro-regulation parties have expressed their disappointment with the super-sized version of the Volcker rule, including Occupy the SEC -- a working group within the Occupy movement whose members submitted a skeptical 300-page response during the recently ended public comment period for the rule -- and Paul Volcker himself, who has called the latest iteration "much more complicated than I would like."

Meanwhile, of the 17,000 public comments Bernanke mentioned, many are from the business community, arguing that the rule still needs to be made permissive, lest it restrict banks' ability to loan and procure capital.

It's not clear when regulators will have an actionable version of the rule ready, though if they miss the July deadline, it will hardly be the first time some part of Dodd-Frank took longer than it was supposed to. As of January, the deadlines had already come and gone for some 200 items in Dodd-Frank, and rulemakers had missed three out of every four, according to a study by the law firm Davis Polk.