Dodd-Frank Anniversary: Has Anything Changed?

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Thursday marks the one-year anniversary of the Dodd-Frank financial overhaul. The new law, which came on the heels of financial catastrophe, was supposed to usher in sweeping change by tightening the reins on the unwieldy financial industry. Now is a good time to ask: Is the financial system any safer?

Not likely. And here are a few reasons why:

First off, just because the law made its first pass through Congress doesn’t mean it’s here to stay. There are two dozen bills in Congress aiming to do away with parts of Dodd-Frank. And many of the rules mandated by the law haven’t even been written. The Wall Street Journal has a piece out today chronicling the troubles facing the Securities and Exchange Commission and Commodity Futures Trading Commission as they attempt to write new rules. The SEC has missed more than 75% of its Dodd-Frank rulemaking deadlines, while the CFTC has missed 88%. Of the 400 rules mandated by Dodd-Frank, only 49 have been finalized. The hairy details of the Volcker rule (which aims to end the practice of banks taking risky bets for their own profit) and derivatives regulation, for instance, have yet to be fleshed out. Why? Funding and staff shortages are part of the problem. Not only are they keep regulators from writing new rules; They’re preventing them from staying on top of responsibilities they already had.

SEC and CFTC officials wouldn’t identify specific enforcement actions that are being hurt. The funding squeeze earlier this year significantly slowed some SEC investigations, according to people familiar with the situation. Investigators still face curbs on payments for expert witnesses and are under pressure to minimize travel costs for collecting evidence, these people added.

SEC officials warn that it “may be forced” to not file charges in some cases and name fewer defendants in others, end some probes sooner and settle cases the agency would rather take to court if the current budget woes continue.

As for the rules already in play, many simply don’t work. Last week I outlined why Dodd-Frank’s ‘say-on-pay’ rule, which aimed to rein in outlandish executive pay packages at big corporations, has been a flop. The rule allows shareholders to vote on CEO pay, but the vast majority of the votes held so far have given pay packages for top execs a pass. Never mind that the votes aren’t binding (corporate boards can overrule them). The real problem is that most shareholders casting a vote are institutional investors who don’t want to rock the boat on trivial matters like executive pay so long as the stock price is still headed up. And on that front, many corporations are doing just fine. The LA Times points out that, even though banks put up a big fuss about financial regulations bringing down their business, many (like Wells Fargo) are reporting record profits this quarter. Profits for JPMorgan Chase, for instance, were higher in this year’s first half than in the first six months after Dodd-Frank was passed. Of course, that’s hardly surprising, since the rules threatening to hinder them haven’t even been written.

(READ: Is Dodd-Frank Reviving the Shadow Banks?)

Meanwhile, the weakest aspect of Dodd-Frank is perhaps the most important: overhauling the market for home loans. Lax mortgage lending was central to the financial crisis, but Dodd-Frank doesn’t even dabble with the fate of Fannie and Freddie. A rule aimed at making mortgage lending safer may require private banks to hold onto 5% of mortgage-backed deals for home loans in which down payments are less than 20%. The thinking is to penalize loans with lower down payments, since they have higher likelihoods of default.  But one important yet overlooked detail is that government-backed lenders Fannie and Freddie would be exempt. As Agnes Crane of Reuters puts it:

The reform effort so far seems to make it harder for the private sector to re-establish itself while entrenching the cost, and risk, with taxpayers. Congress and regulators must assess housing finance as one market. Until the future of the hulking government mortgage finance companies is mapped out, the worthy goals of Dodd-Frank don’t mean much.

Barney Frank, one of the law’s main sponsors, heads to Congress Thursday to defend Dodd-Frank’s progress. He, along with the regulators slated to testify, will have a lot of explaining to do.

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Roya Wolverson writes for TIME. Find her on Twitter at @royaclare. You can also continue the discussion on TIME’s Facebook page and on Twitter at @TIME.

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