Minneapolis Fed President Gary H. Stern spoke at the American Enterprise Institute last week in favor of using the markets to help regulate banks -- an exercise roughly equivalent to preaching conservation to the Sierra Club.

But 10 years ago, when Mr. Stern and his colleagues at the Minneapolis Federal Reserve Bank first began suggesting that bank regulation could be made cheaper and more efficient by complementing it with market-based risk assessments, they had a harder time finding an interested audience.

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