The apparatus that oversees the nation's financial system is an ad hoc creation: every time there is a fiscal panic, new agencies are formed and existing ones receive new responsibilities. This is the first crisis since the 1987 market crash, and financial institutions and products have changed rapidly in the last 20 or so years, exposing regulatory redundancies and enormous gaps, like a lack of oversight for some derivatives and credit default swaps.
In March, Treasury Secretary Henry M. Paulson Jr. issued a plan to revamp regulation and modernize the system, but at the time, most lawmakers and lobbyists considered it far down the list of priorities and unlikely to be adopted.
"Few, if any, will defend our current Balkanized system as optimal," Mr. Paulson shot back to critics in a speech that month at the Treasury Department.
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