"Without an investigation, the reform effort will be at best, hit or miss, and at worst, a charade. Congress should start now to gear up for an investigation, using as its model the 1930s Pecora inquiry into the stock market crash, or the Watergate hearings of the 1970s. The investigation should not be performed by outside experts, like the 9/11 commission, whose report Congress is free to accept or reject. It should be part of the Congressional process and include an investigator with subpoena power and the right to participate in the questioning of witnesses, as well as to prep lawmakers for the hearings.

A real investigation might serve as a channel for the public anger now used by politicians to score quick populist points on television without tackling the real issues.

Who is to carry out the reforms? Any serious call for reform has to acknowledge the severe institutional damage that has been done to the nation's regulatory agencies. For 30 years, the political tide in this country has run against regulation and for deregulation. In the last 10 years, opponents of financial regulation have been especially successful in dismantling and undermining regulation — putting their faith and the nation's future in the hands of a market discipline that turned out not to exist and can't-miss financial products that missed, big.

There is not an agency that has not suffered a diminution of expertise or reputation.

Recent examples include the Federal Reserve's repeated failures to use its consumer-protection authority to stop unfair mortgage lending; the Securities and Exchange Commission's failure to heed repeated warnings about the Madoff Ponzi scheme; the efforts by the Office of the Comptroller of the Currency, a bank regulator, to block state regulators' efforts to police lending violations; and the utter failure of the Office of Thrift Supervision, A.I.G's federal regulator, to understand — or, even worse, care about — what was going on at that company.

Unfortunately, there are many, many more examples. Advocates of deregulation point to the failures as evidence that the government has no intrinsic ability to police markets. That is incorrect. The nation's regulatory agencies have been allowed to languish, underfunded, understaffed — and too often headed by political appointees who are true believers only in the dogma of deregulation and not in their agencies' missions.

If the United States is going to have meaningful reform of its out-of-control financial system, new rules will only be a first step." NYT