President Trump Donald John TrumpBiden on Trump's refusal to commit to peaceful transfer of power: 'What country are we in?' Romney: 'Unthinkable and unacceptable' to not commit to peaceful transition of power Two Louisville police officers shot amid Breonna Taylor grand jury protests MORE and the Federal Reserve continue to clash over interest rates, but another simmering dispute concerns the regulatory burden the Federal Reserve and other agencies impose on banks. This latest fracas involves one of the costliest provisions of the Dodd Frank Act of 2010.

This is the Volcker rule. It is an edict that generally forbids banks from using their own capital to trade in securities or invest in hedge funds and private equity funds. It posed such a huge burden for small and midsize banks that last year, President Trump signed bipartisan legislation to relieve those institutions from the restrictions. Yet one year later, the Federal Reserve and four other regulatory agencies are defying the White House and Congress by not implementing the full relief from the Volcker rule prescribed in the law, leaving Main Street banks mired in the red tape that is hindering their efforts to serve consumers and small businesses.

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Like much of the Dodd Frank Act, the Volcker rule was a very flawed and unnecessary government response to the financial crisis. While it was supposed to target the “risky trading of Wall Street,” in reality it regulates banks regardless of their size or the extent of their trading activity. This includes many small institutions that engage in little to no asset trading. It imposed substantial burdens on those institutions, estimated as high as $4 billion in regulatory costs for banks. It damaged liquidity by raising the cost of credit for consumers and businesses by billions of dollars. The Volcker rule was aimed at Wall Street but missed and hit Main Street.

That is why President Trump, along with support from Republicans and a significant number of Democrats, signed into law the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018. The legislation has a provision to provide relief from the Volcker rule, mirroring a Treasury Department report that recommended lifting it off of small and midsize banks, as well as banks of all sizes that engage in little asset trading.

It is one of the key legislative victories of President Trump, a crowning jewel for his record as one of the most deregulatory commanders in chief in modern history. But despite the clear mandate from the White House and Congress, federal regulators are attempting to short circuit this relief. Regulators are misusing some text in the law that admittedly could have been phrased better. However, the meaning is clear in double negative phrasing used to describe which banks are exempted from the rule. The text states that the regulated banks are not those that do not have more than $10 billion in total assets and more than 5 percent in trading assets.

Regulators claim the law exempts banks that are both under $10 billion in assets and under 5 percent in trading assets. This is incorrect. In reality, the law exempts banks if they meet only one of the conditions, either under $10 billion in assets or under 5 percent trading assets. No mere argument over phrasing, the regulatory change would have a substantial negative impact. It would mean the Volcker rule would continue to burden not just Wall Street behemoths but hundreds of traditional banks serving their communities. The proposal would constrain the ability of these banks to reward savers and lend to consumers and small businesses.

Ironically, despite the reluctance of the Federal Reserve to follow the law, Chairman Jerome Powell has expressed support for providing relief. He testified before Congress two years ago that the Federal Reserve “would support a significant tailoring of the application” of the Volcker rule so that it “falls on the banks that have the biggest trading books.” Yet this is precisely the kind of reform that Congress provided and on which the Federal Reserve is refusing to follow through. No matter how powerful they are, the Federal Reserve and other regulatory agencies do not have the authority to impose a regulation that conflicts with the law. Indeed, that is an illegal encroachment on the legislative authority of Congress.

Leaders of more than a dozen conservative and free market groups have sent a letter to the regulatory agencies demanding they follow the law. Noting that it was the “first significant piece of financial reform” since the Dodd Frank Act, the signers wrote “it is imperative that the regulatory agencies charged with implementing the statutory amendments faithfully execute the mandates set forth by Congress.” Both President Trump and Congress achieved a remarkable victory by providing regulatory relief from the Dodd Frank Act. They should not sit idly by while regulatory agencies ignore the law and refuse to grant this much needed relief.

Daniel Press is a policy analyst with the Competitive Enterprise Institute. John Berlau is a senior fellow with the Competitive Enterprise Institute.