Regulation and the Agencies

President Obama's plan to regulate the financial system, announced yesterday, has sparked a lot of debate in Congress. But no matter the politics of the overhaul, I'd like to see more discussion of the resources agencies would need to take on expanded responsibilities, and a sound, detailed plan for standing up a new regulatory agency:

The plan would give the Federal Deposit Insurance Corporation new powers to seize troubled banks and other companies when they falter and could harm the larger financial system. It would also give the Securities and Exchange Commission and the Commodity Futures Trading Commission the power to put in place new rules for derivatives, including credit default swaps.

And it would create a federal agency to oversee consumer products like mortgages, annuities and credit cards. That proposal has already provoked a barrage of criticism from banks, which would have to face a new set of examiners in addition to the ones that already supervise them for safety and soundness.

As folks ought to have learned from the standup of the Transportation Security Administration, creating a new agency, even when it's a matter of shifting an existing private-sector industry to governmental control, is not easy. President Obama should probably resist the urge to experiment with a new personnel system at his new agency, if Congress gives it to him. But he'd better have a plan for how it will be staffed and managed sustainably.