Each of the crises of the past 25 years—the collapse of the savings and loan industry, the Internet-stock bust a decade later and last year's credit-market meltdown—were the result of inadequate regulation, says former Comptroller of the Currency Eugene Ludwig.
"The failure has been government's inability to restrain bubble growth, and then often reacting with the wrong medicine," he says.
The administration's financial plans focus on the right issues, but some don't go far enough, he says. Financial experts who are more critical of the plan say it largely consists of half-measures that aren't likely to rein in excessive risk-taking by banks.
Among other things, the administration's plan would do away with one bank regulator, but leave multiple agencies in charge of bank supervision. It calls for collaboration between the Securities and Exchange Commission and the Commodity Futures Trading Commission, but stops short of combining the agencies--even though their missions are increasingly similar. And the administration would impose more controls on the largest banks' risk-taking, but would still view them as "too big to fail."
Some modest steps have been taken. Congress passed a bill restricting certain activities of credit card issuers. And investment banks have been forced to reduce the amount of borrowed money they can use when making bets.
But the most powerful changes sought by the Obama administration—such as the creation of an agency to police consumer products, including mortgages and credit cards—face an uncertain future.
President Barack Obama, whose plan has yet to get off the ground in Congress, renewed the push for financial reregulation in a speech on Wall Street Monday. His proposals would "make certain that markets foster responsibility, not recklessness" and "reward those who compete honestly and vigorously within the system, instead of those who are trying to game the system."
The pace of negotiations in Congress will pick up in the weeks ahead. Democrats, who have been consumed by the health-care debate, want to complete a financial overhaul bill by the end of the year.
The first piece of legislation to be taken up by the House Financial Services Committee will be the creation of the consumer product agency.
The idea is opposed by bank lobbyists, Republicans and some conservative Democrats who say it will drive up costs for businesses and consumers.