WASHINGTON — Senate Banking Committee members raised a host of concerns Thursday about the state of the financial services industry as regulators grapple with a mountain of new rules mandated by the Dodd-Frank Act.

Among their top worries were the stability of the banking system, weaknesses in mortgage servicing, regulatory burdens on community banks and the pace and tone of required rulemakings.

Sen. Richard Shelby, the panel's top Republican, urged regulators to weigh the impact of their actions rather than rushing to finish promulgating rules in time for arbitrary targets required under the law.

"In the rush to comply with the unrealistic deadlines set in Dodd-Frank, the regulators have had to focus on speed rather than deliberation," Shelby said. "While our regulators will do their best to comply with the deadlines, Congress should seriously examine whether the speed of the process is undermining its integrity."

Shelby said Congress should step in.

"We should begin considering whether the final rules would be better if our regulators had more time to hear from the public," Shelby said. "Absent legislative action, Dodd-Frank is going to be very expensive."

The Alabama lawmaker also grilled regulators on whether they are any better positioned to deal with the failure of a major financial institution two years since the crisis exploded. He questioned, for example, how the Financial Stability Oversight Council will be able to deal with systemic risk when its chairman, Treasury Secretary Tim Geithner, has publicly admitted defining systemically significant institutions will be hard to do.

"If it is impossible to know what firms are systemic until a crisis, the Financial Stability Oversight Council will have a very difficult time objectively identifying systemically significant banks and nonbanks for heightened regulation," Shelby said, asking Federal Reserve Board Chairman Ben Bernanke how he planned to avoid making "arbitrary" designations.

"It is a difficult problem," Bernanke said. "If you are going to price different types of firms on different types of shocks it's also true that an individual industry, some small firms, might be subjected to broader shocks, like mutual funds for example."

But Bernanke said Dodd-Frank had strengthened regulators' ability to act.

"One of the sources of the crisis of 2008 was there were substantial gaps in the oversight of many large firms like AIG, for example, which didn't have strong consolidated oversight and I think our task is to do the best we can to try to identify the firms which most likely pose a risk," Bernanke said.

But Shelby pressed him on what "doing one's best" means in the regulatory context.

Bernanke said that regulators have a rule out for comment on what criteria should be used and how it should be applied to make such determinations.

"We don't want to be arbitrary," he said. "What we would like to do is put out relatively clear guidelines about criteria that we will use to try to identify firms that are designated systemic."

Federal Deposit Insurance Corp. Chairman Sheila Bair added that interconnectedness and counterparty credit risk should be key factors in determining a systemic designation.

But lawmakers at the hearing expressed several other concerns and at least some appeared to fall along party lines.

For example, as Congress fights over a continuing resolution that would make cuts to the budgets of the Securities and Exchange Commission and Commodity Futures Trading Commission this year, Democrats voiced worries that the Dodd-Frank Act could provide the American public with a false sense of security that they are protected from further financial calamity.

Sen. Robert Menendez, D-N.J., asked SEC Chairman Mary Schapiro if the proposed funding cuts would be equivalent to a "cop on the beat without any bullets?"

"It is a concern that I have, because if we are going to promote regulations pursuant to the law but not be able to enforce them. … It is a hollow promise to the American people," he said.

But Republicans echoed concerns raised by their counterparts in the House this week that bulking up funding would only give the green light to regulators to enforce a law they think goes too far.

Some GOP members were more focused on how the new law would hit small banks.

"Are my bankers just normal complaining types where they have it wrong?" asked Sen. Pat Toomey, R-Pa. "Or are the regulators overregulating community banks?"

Regulators said that the bulk of Dodd-Frank was focused on ending "too big to fail," not harming community banks.

Sen. Jack Reed, D-R.I., meanwhile, focused on regulators' pending investigation of top mortgage servicers. American Banker reported Wednesday that regulators are close to issuing enforcement actions against the largest servicers, with undetermined financial penalties likely. Acting Comptroller of the Currency John Walsh said that the banking regulators are working with the Department of Justice and state attorneys general to come up with a comprehensive settlement, but said penalties were still being decided.

"We have finished the work," Walsh said. "We are getting to the point where we will be delivering documents to the banks and talking about civil money penalties but the comprehensive settlement that we are talking about is one that will also involve … other agencies."

Reed said to hurry up.

"I think you need to move with some expedition," the Rhode Island Democrat said.