The financial crisis has produced a bevy of reform proposals. As with health care, every relevant regulatory agency, congressional subcommittee, trade association, think tank and pundit has a plan, including the most comprehensive one of all from the Obama administration.

The Treasury released its broad but tepid proposal nearly four months ago. It has since languished in neglect, causing Treasury Secretary Geithner to proclaim periodically, like a character from Monty Python, that the reform proposal was not dead. President Obama tried to revive it last month on the anniversary of Lehman Brothers' demise, and House Financial Services Chairman Barney Frank vows action by the end of the year, but we'll see. Financial services regulatory reform doesn't bring out committed partisans to town hall meetings like health-care reform, nor does it inspire great political activism.

This is, however, a rare and important opportunity to modernize financial services regulation and bring it into the 21st century to address some of the glaring gaps revealed by the most recent meltdown.

First, the absence of a systemic regulator meant that no one oversaw the entirety of the financial markets and was informed of the leverage, risk and bubble characteristics of the building froth in mortgages, securitizations and derivatives of securitizations. While it's not clear or even likely that any government agency could ever prevent a bubble, or appropriately prick one if it appeared, there was no one with either oversight or responsibility for systemic risk.

Second, there was so much opacity in the system that there were huge information gaps, allowing lethal leverage to be created, individual institutions (e.g., AIG) to take on grossly disproportionate levels of risk, and systemic interconnectedness no one understood nor foresaw.

Third, there was no formal "resolution authority" to ensure that systemically important institutions such as Lehman could be taken over and "resolved" by the federal government, as the government did so effectively in the late 1980s in the savings and loan crisis.

And finally, there was considerable consumer confusion and misinformation — about mortgages, mortgage rates and payment risk.

Each of these gaps is addressed, directly or indirectly, by the Treasury's rather flaccid and unimaginative proposal. And yet each part is controversial. Who should be the systemic regulator, the Fed or a brand-new independent agency? How much information about derivatives should be disclosed to inform customers, the public and regulators without hurting liquidity or innovation? And is yet another new federal consumer protection agency really necessary to rectify the information gaps, or would clear mandates or directions to an existing agency — e.g. the SEC, the FTC or the CPSC — accomplish that objective?

The affected industries and regulatory agencies and their congressional champions will use these issues to impede reform. But there's an excellent opportunity in financial services regulatory reform to build bipartisan consensus and push the needed reforms through before the process is derailed by the champions of the status quo.

In a little-noticed provision of the stimulus bill passed by Congress and signed by President Obama last spring, Congress created a Financial Crisis Inquiry Commission made up of 10 members appointed by the congressional leadership — six Democrats and four Republicans — and charged it with investigating the causes of the crisis, recommending remedies and reporting by the end of 2010.

The panel is chaired by the well-respected former California State Treasurer Phil Angelides, and its members include political heavyweights (former Republican Congressman and Ways and Means Chairman Bill Thomas to be vice chairman, and former Democratic Sen. Bob Graham) and financial regulatory heavyweights (ex-White House Counsel Peter Wallison of AEI and ex-CFTC Chairman Brooksley Born) on both sides of the aisle.

The 9/11 Commission, co-chaired by Democrat Lee Hamilton and Republican Tom Kean, reached broad bipartisan consensus on a range of reforms, many of which have already been enacted into law. Other congressional commissions and select committees, including the Social Security Reform Commission in the mid-'80s, the Select Committee on Intelligence in the late '70s and even the Senate Watergate Committee in the early '70s were able to act in a truly bipartisan manner and implement significant and constructive reforms.

If the Financial Crisis Inquiry Commission can perform a similar service, financial services regulatory reform need not get bogged down by the special interests or the political opportunists.

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