Remember That Financial Crisis?

WASHINGTON, July 24, 2009— -- Remember that whole financial crisis?

This summer has been dominated by the raging debate over health care reform. Any discussion about the financial sector has usually focused on the surging stock market, with the Dow on Thursday surpassing the 9,000 mark for the first time since January. All things considered, it's easy to see why the Obama administration's proposed financial regulatory overhaul has been relegated to the back seat.

But today the sweeping measures to revamp the financial system in the wake of the worst financial crisis since the Great Depression are once again taking center stage on Capitol Hill. Treasury Secretary Tim Geithner, Federal Reserve chief Ben Bernanke, and FDIC chair Sheila Bair, among others, are testifying on the measures before the House Financial Services committee.

"These proposals were designed to lay the foundation for a safer, more stable financial system, one less vulnerable to booms and busts, less vulnerable to fraud and manipulation," Geithner said. "The president decided we need to move quickly while the memory of the searing damage caused by this crisis was still fresh and before the impetus for reform faded. These proposals have led to an important debate about how best to reform the system, how to achieve a better balance between innovation and stability. We welcome this debate."

There is plenty to debate. The administration's proposals are extensive. A consumer protection agency to fight for consumer's rights and interests. New oversight duties for the Fed to monitor systemic risks to the system. Resolution authority for the government to wind down large, failing firms whose failure would threaten the overall economy. And that's just the tip of the iceberg. But not only have the administration's reforms been overshadowed, they have also been blasted by the financial industry and Republicans.

"When you have the wrong diagnosis, you will in turn offer the wrong remedy and that is exactly the case with the administration's proposals before us," said Rep. Jeb Hensarling, R-Texas. "Our economic turmoil has not arisen from deregulation, but more so from dumb regulation."