Repairing Bank Regulation

eFC logo

The broad dimensions of the Obama administration's regulatory overhaul set for release this week have been sketched out in media reports.

According to The Wall Street Journal, the administration white paper will strengthen the Federal Reserve's role as primary systemic risk regulator. The administration also reportedly will seek to empower a "council" of regulators (comprising the Treasury, the Fed and FDIC) to seize and unwind large institutions in danger of failing. However, the program won't reduce the number of federal agencies that oversee financial institutions and products, nor place specific ceilings on banks' size, scope or compensation levels.

Can such an approach substantially reduce the danger of another financial-system crisis?

If not - then what is the most important missing ingredient?