In passing laws, Congress focuses on policy outcomes and pays scant attention to the difficulties that administrative agencies will face in implementing the measures. Further, Congress frequently imposes deadlines for issuance of implementing rules that are impossible for the agencies to meet. The regulatory agencies charged with implementing the Dodd-Frank financial reform legislation are currently struggling with this problem. The statutory requirements for issuance on short notice of hundreds of rules has inundated their analytical and policy formulation staffs.

A new study by the Davis Polk law firm has revealed the problems the financial regulatory agencies face. In April 2011, the regulatory agencies were required to issue 26 rules to implement Dodd-Frank. They missed every deadline. The agencies broke down on what Davis Polk calls the “Comment Mountain”–the review by the policy making staffs of an avalanche of sophisticated comments, in order to determine the optimum method of regulation and to develop the optimum basis for defending the rule against anticipated legal challenges. The problem will only get worse.

Dodd-Frank requires ten agencies to issue another 108 rules on July 21. Since the regulatory staffs already are well behind schedule, they will be able to keep up when their workload quadruples in this quarter. Moreover, the regulatory burdens are not spread evenly. Davis Polk calculates that the Securities and Exchange Commission faces deadlines to issue 45 rules during the third quarter, and the Commodities Futures Trading Commission must issue 33 rules. For comparative purposes, in the 18 months prior to passage of the law, the CFTC never had more than four proposed rules outstanding at any time. Since Congress did not give the regulatory agencies either the time or the resources necessary to expand their analytical capacity, their policy offices are now completely swamped and will require an extended period to recover.

The general rule is that, unless Congress has provided a fallback provision that automatically goes into effect, there is no immediate consequence if an agency fails to meet a rulemaking deadline. An affected entity may sue the agency for its inaction, and the court may issue an injunction that requires the agency to act by a date that is feasible for issuance of the rule. Some provisions of Dodd-Frank, however, give rights to private parties as of the deadline and direct regulated entities to observe those rights pursuant to agency rules. Awkward situations will arise if the rules are not promulgated in time for financial firms to revamp their business processes before the date that private rights vest.

The situation facing the Consumer Financial Protection Bureau adds another layer of complexity. That agency, which will come to life on July 21, has great discretionary rulemaking authority concerning both the substantive terms of financial instruments and their marketing to consumers. The CFPB cannot issue rules without a director who has been formally appointed to the position, but the administration has not acted for fear of a confirmation fight and to maintain treasury's control over the agency's initial policy initiatives. The president soon will have to make a recess appointment, which assures that the first rules issued by the CFPB will generate institutional, as well as policy and political, disputes.

In sum, financial agency regulatory staffs will struggle for years with the consequences of Congress' lack of understanding of the administrative steps necessary to carry out one of the most significant pieces of legislation adopted in recent years.

John F. Cooney is a partner in the Washington, D.C., office of Venable.

Read John Cooney's previous column.