While you were getting that pair of socks you always wanted, the government got an unexpected Christmas present: the first lawsuit seeking to nullify a portion of the Volcker rule, which regulators just finalized a few weeks ago. And the lawsuit was not filed by JPMorgan Chase or Goldman Sachs, but the American Bankers Association, which is the trade group for small and mid-sized banks. The ABA objected to a part of the rule that would force legitimate accounting on losses garnered in the wake of the financial crisis. The suit represents an important and early test of financial reform—and you can trust that the Wall Street behemoths are watching closely to see whether regulators will have the spine to defend a rule they spent years writing. So far, the early signs are not promising.

Under the Volcker rule, banks are restricted from holding certain “covered funds” in their long-term portfolios, including collateralized debt obligations, or CDOs. There’s good reason to do so: CDOs, which take the riskiest parts of other securities and re-package them to allegedly make them safe, nearly blew up Citigroup. After the housing bubble collapsed, CDOs derived from mortgage-backed securities became almost worthless, creating hundreds of billions in losses at Citi, and leading to multiple government bailouts. The covered funds provision would force banks like Citi away from assuming such high-risk financial exposures. It goes hand in hand with the main goal of the Volcker rule, to limit profit-seeking proprietary trading at commercial banks.

As many CDOs remain worthless today, the rule would force some banks to realize losses on current holdings. In fact, this whole dust-up is mostly about one bank. Zions Bancorp, a regional bank out of Salt Lake City, Utah, announced two weeks ago that it would have to sell off a series of CDOs before the Volcker rule takes effect in July 2015, leading to a projected loss of $387 million, more than the annual earnings of the bank over any of the last five years. These losses were going to surface sooner or later, but the old accounting rules allowed Zions to basically hide them on their books by classifying CDOs as “hold to maturity.” The Volcker rule eliminates the ability for Zions to maintain this ruse, and so the bank said it would relabel the CDOs as “available for sale,” forcing a write-down to fair-market value.

In other words, the old accounting rules prevented investors from discovering the true financial health of the bank. As a way to flush out accounting fictions, the Volcker rule serves an important purpose; this certainly would have prevented Citigroup from continuing to amass the CDOs that led to the bank’s near-collapse. Zions doesn’t come out a loser in this scenario; it already lost, by purchasing lots of risky assets that eventually failed.

Nevertheless, Zions didn’t want to air its dirty laundry for all to see; realizing the loss would impact investor perceptions and its stock price. Plus, it would have to raise more capital to make up for the losses-masquerading-as-capital on its balance sheet. So it got its lobbyists at the American Bankers Association to whine about the situation. That led to the Christmas Eve lawsuit, seeking an immediate injunction against the part of the rule that would force the accounting changes.