After a yearlong effort to get it right, the U.S. Senate passed a financial overhaul bill last week that actually weakens the government's ability to manage the next financial crisis. The House version passed last December is better, but not much.
Neither measure effectively addresses the problem of the 10 to 15 too-big-to-fail U.S. financial companies, which in the past occasionally have required bailouts to prevent their collapse and a consequent panic in financial markets.
Nothing in either bill requires banks to become smaller, or discourages them from becoming even bigger. Undoubtedly, many institutions will grow larger. After all, regulators already encouraged JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co. to acquire large failing financial companies during the recent economic crisis. Very large banks have difficulty managing all the different risks they carry, and periodically one or another of them fails at it.
Read the full opinion editorial on Bloomberg.com.