Treasury hits back at Dodd-Frank critics

Co-sponsors of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Sen. Christopher Dodd (L) and Rep. Barney Frank, wait for U.S. President Barack Obama to sign it into law at the Ronald Reagan Building in Washington, July 21, 2010.

WASHINGTON (Reuters) - The Obama administration fired a fresh salvo at Wall Street on Tuesday, telling critics of the U.S. financial reform law to knock off their attacks.

"We will continue to oppose efforts to slow down, weaken, or repeal these essential reforms," Deputy Treasury Secretary Neal Wolin said of the Dodd-Frank financial reform act signed into law last July.

Republican lawmakers, urged on by Wall Street, have taken aim at Dodd-Frank as many of the rules putting it into effect are still being written.

They want to restrain the power of the new Consumer Financial Protection Bureau by limiting its funding, and are seeking less stringent rules on lucrative derivatives trading.

JPMorgan Chief Executive Jamie Dimon took several punches at the financial reforms earlier this month at an event in Washington, criticizing capital rules, the new U.S. risk council and derivative reforms.

"It will stifle economic growth and I already believe it is," he said of new international bank capital standards.

Wolin, taking his firmest tone with the law's critics in months, reminded them on Tuesday of the damage caused by the 2007-2009 financial crisis and the regulatory gaps that helped cause it.

The deputy secretary is charged with overseeing the law's implementation, including setting up mechanisms that will determine which financial institutions are considered systemically important and therefore subject to more stringent capital requirements.

"There will, of course, continue to be disagreements and opposition as we move forward. There will be critics and naysayers," Wolin told an event sponsored by the Pew Charitable Trusts, a public policy group.

"But those who are charged with implementing reform have not forgotten why we needed reform. We needed reform because ultimately, a fragile system benefits no one. We needed reform because we can't afford another crisis."

RISK COUNCIL UNDER FIRE

At a congressional hearing last week, lawmakers from both parties voiced displeasure with the Financial Stability Oversight Council set up by Dodd-Frank to ward off threats to the U.S. financial system.

The council of regulators is charged with deciding which significant non-bank financial firms, such as insurers and private equity firms, could pose a risk to the financial system. Those chosen would be scrutinized by the Federal Reserve and have to abide by costly new rules.

Lawmakers, primarily Republicans, accused the council of being opaque about its criteria for picking the firms.

Wolin disputed that criticism, saying the council, headed by Treasury Secretary Timothy Geithner, has sought an abundance of public comment and is more transparent than any other regulatory body he could think of.

The Federal Reserve released in February some guidelines for how regulation would pick these "systemic" firms, including a two-year test to determine if a firm's predominant business is financial.

But the proposal leaves insurers and hedge funds guessing if they will fall under the stricter regulatory regime.

When asked whether the risk council would seek comment on the final designation criteria, Wolin said the council of regulators had to make that decision. The council will "continue to find ways to get public input," he said.

The insurance industry and some lawmakers are also upset that an insurance expert, who will be able to vote on the council, has not yet been appointed.

Wolin said that the administration would nominate that expert "quite soon."

(Reporting by David Lawder, Rachelle Younglai; Editing by Kim Coghill and Tim Dobbyn)