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A financial stability board: cutting the Gordian Knot of U.S. financial regulation.

Article Excerpt
A single macro-prudential regulator should have responsibility for the stability for any national financial sector. This is the emerging consensus in the United States and in other industrial countries. The buck, so to speak, has to stop somewhere.

What should this regulatory agency do? One idea is that it should look after large complex institutions that have been designated systemically significant. Such institutions do need better supervision, and concentrating the talent needed to supervise them better in a single place makes sense. But if a separate regulator does this, it will have a strong interest in perpetuating these institutions forever--a bad and in fact an impossible idea. Moreover, large numbers of institutions and markets would lie beyond its purview where history tells us that many systemic crises, including the current one, start.

A second idea is that the Federal Reserve should be given greater oversight authority. This doesn't seem completely persuasive either. Chairmen vary in their commitment to regulation: the last one...

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