With time, reg restructuring plan draws critics

"Too many cooks," declared the Economist; "basically punts on the question of how to keep it from happening all over again," Paul Krugman wrote in today´s New York Times; "an exercise in political triangulation," says the Washington Post´s Steven Pearlstein.

Within days of its release, the pundits have decided they aren´t happy with the Obama administration´s new plan for regulatory restructuring. They say it fails to address the problem of too many regulators while instead adding more bureaucracy with a new systemic risk council and a new consumer protection regulator.

Krugman thinks new standards for retaining risk in loan origination aren´t tough enough, and points out that there´s little in the way of reform offered to curb the power of the rating agencies, a sentiment Pearlstein echoes. And on consolidation, Pearlstein reasons, "If you have to set up a council of regulators just to harmonize the rules used by different bank regulators, why not bite the bullet and consolidate them into a single agency?"

But there´s one important thing the commentators don´t seem to mind: the proposal to expand the Federal Reserve´s powers to allow the agency to oversee systemic risk. Krugman calls it "good stuff," and Pearlstein declines to condemn it. The Economist, while acknowledging the potential pitfalls, concludes that "if macroprudential regulation is to be done, the central bank is the logical body to do it."

Eliot Spitzer, the fallen New York governor and former scourge of Wall Street, thinks the plan fails to hold regulators accountable for their failures. "Each of the major regulatory steps that the Treasury secretary and the director of the National Economic Council have set forth makes eminent sense," Spitzer wrote in his Slate.com column yesterday. "Yet each was already squarely within the purview of an existing federal agency."

Ideology aside, Spitzer is the one voice of the four closest to regulation and Wall Street in practice and his point is worth noting. As for the others, while they may be right, their muddled mixes of praise and criticism smack of the old adage about compromise: When it is reached, no one is happy.