H.J. Huneycutt

Senator Christopher Dodd is reportedly readying legislation that would strip the Fed and FDIC of almost all their bank-supervision powers, creating in their place a new agency in charge of supervising all banks and bank-holding companies. The suggestion is in stark contrast to approaches taken by the House and favored by the Obama administration, which have pushed to expand the Fed's powers.

Politics as usual. Dodd has a horrendous track record on these sorts of things and over the past few months, has been desperately trying to do anything to create an image for himself as 'someone trying to take on the big interests.' But it's all a sham, meant to try to save his desperate bid for re-election.

I don't know enough about the details of this proposal to say whether or not it's a better approach than the Administration's. My current feeling is that both are severely lacking.

How about this for reform:

(1) Re-enact Glass-Steagall; phase it in over the next five years
(2) Split up the Goliath banks and create disincentives to form them (e.g. extraordinarily high FDIC fees for banks with certain market caps).

Those are the two best things Washington could do. We need to get rid of "too big to fail" and go back to promoting small business. While we're at it, let's lower corporate taxes on companies under a certain size and create less regulatory hurdles for small entrepreneurs. We've set up an environment where the little guys have difficulty forming and these big massive companies have all the advantages.