The Obama wants to centralize regulation of financial insitutitions into a few agencies headed by the Fed. At least one of his people, Sheila Bair, the head of FDIC (Federal Deposit Insurance Corporation) disagrees.
We believe Bair has a couple of important points. The first is, the more agencies, the more watchdogs, the more likely that wrongdoing will be caught. Its really a form of regulatory entrepreneurship.
The alternative is fewer agencies with more power. The dangers here are at least threefold. The first is that fewer overseers mean fewer chances of catching wrong doing. The second is that concentration of power may cause agencies to overreact when they do catch someone. And the third, and worst, possibility, is that concentration of power in a few agencies makes it easier for lobbyists and others to "co-opt" them.
The current model seems best; lots of regulators, relatively limited powers. That way, you can get people like (the late, lamented New York sate Attorney General), Eliot Spitzer. The more watchdogs, the better.
It is said that the greatest deterrent to crooks is the fear of getting caught. This, in turn, is tied to the number of police. This is an even greater deterrent than the severity of penalty if caught.