An optimist might see in financial regulatory reform a glass half full, a pessimist a glass half empty. But either way, the system seems to have sprung a leak.

This morning, five of the country’s top regulators gave their first progress report on financial regulatory reform since the House turned Republican.

The Dodd-Frank bill, passed almost seven months ago, gave regulators an ambitious mandate, and the hearing let them run through a laundry list of offices formed, rules suggested, and studies enacted. But a more sobering measure of progress could be found outside the hearing room, in news of efforts to cut off the regulators’ funds.

The Security and Exchange Commission and Commodity Futures Trading Commission – two of the most significant regulatory bodies – have been squeaking by on stop-gap funding that runs through March – funding that doesn’t give them any more money to enact and enforce all those new rules.

The result is, as Bloomberg Businessweek reported, “a little like arming a big-game hunter with a pea shooter.”

Meanwhile, House Republicans unveiled a budget plan that would seek to cut nearly half the budget of the in-progress Consumer Financial Protection Bureau.

None of which comes as a surprise. Dodd-Frank isn’t going to be repealed, so enemies of the bill have been expected to try to defang, defund and delay. In fact, according to a Congressional Research Service report hearings like this morning’s are yet another tactic of delay and influence.

All this helps to explain why despite the talk of progress,
“Modernizing the Outdated U.S. Financial Regulatory System” still shows up on the Government Accountability Office’s “High Risk” list:

“Financial regulators have yet to develop and issue many of the rules necessary to fully implement various changes, including those related to proprietary trading, trading and clearing of over-the-counter derivatives, and others. Until these new structures, requirements, and entities are in place, fully staffed, and functioning effectively, the act’s intent to reform the financial system will not be achieved.” [emphasis added]

Most of Dodd-Frank’s provisions have a deadline of one year, meaning that today’s hearing marks a kind of halfway point. But the next half is going to be harder than the first.