Wall Street banks are using the threat of lawsuits to preventregulators from writing rules mandated by the Dodd-Frank Act, saidBart Chilton, a Democrat on the U.S. Commodity Futures TradingCommission.

“Some regulators live in constant fear and are virtuallyparalyzed by the threat” that they will face “spuriously” filedsuits alleging that the costs and benefits of their rules weren'tadequately considered, Chilton said in a speech prepared for theTrade Tech 2012 conference today in New York. “It is abastardization of the conduct and use of cost-benefit analyses inregulatory rulemaking.”

The CFTC is defending against a challenge filed last year infederal court that the agency overstepped its authority under theDodd-Frank Act and inadequately assessed the costs of new limits onspeculation in oil, natural gas and other commodities. The lawsuitwas filed by the International Swaps and Derivatives AssociationInc. and the Securities Industry and Financial MarketsAssociation.

The lawsuit is one of the financial industry's highest profileefforts to challenge Dodd-Frank, the regulatory overhaul enacted in2010. The associations represent JPMorgan Chase & Co., GoldmanSachs Group Inc. and Morgan Stanley, among other derivativesdealers. A judgment is pending.

Chilton, a supporter of the speculation limits, said banks andothers should be required to provide cost analyses to rebutregulators' conclusions.

“We put out a proposal, ask for comments and ask what the costsmight be,” Chilton said. “Then we either aren't provided with costsof the regulation, or what we get from the commenters isn't veryhelpful.”

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Chilton said CFTC data show that hedge funds and otherspeculators increased their positions in energy markets 43 percentin January of this year from June 2008.

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