MattY points us to a Gillian Tett column in the Financial Times, which ends with this:
If regulators and politicians are to have any hope of building a more effective financial system in future, it is crucial that they start thinking more about power structures, vested interests and social silence. That might sound like an irritatingly abstract or pious plea. However, it has some very practical implications about how policy is formulated. I will seek to flesh out some of those in next week’s column....
This is a surprisingly underdiscussed point, but it's something that's critical to how we think about financial regulation. If we want regulation to work, the regulatory structures need to be set up so that their institutional power bases push them in the direction we want them pushed. That's why, for example, I don't like the idea of the Fed gaining more power over consumer regulation: it's institutionally and culturally oriented toward the financial community and macroeconomic management. Consumer regulation will never be taken seriously there no matter how many laws we write.
I'm not sure if this means that an entirely separate agency needs to be set up or not, but whatever we do has to take account of how power actually works. Not only does consumer financial regulation need to be in the hands of someone who considers it their prime responsibility, but it needs to have committee support in Congress and some kind of natural constituency with serious political juice and a financial interest in making sure consumer regulation works. Otherwise it will sink into bureaucratic oblivion. Suggestions welcome.