(Community Matters) in response to my original posting on Secretary Geithner and regulation of financial institutions, economist and UT finance professor Michael Brandl made the two following, illuminating comments:
first: Eugene – the key question to ask is: why are the banks paying all of these bonuses and yet many (small business and consumers) can not seem to get access to credit? The answer is the system that has now been set up encourages banks to borrow from the Fed at near zero rates and bring these funds to the commercial paper & currency markets and earn nice returns with defacto zero default risk. Thus, by not considering the longer term objectives of policy changes we have mis aligned incentives in the financial markets.
second: Thanks Eugene – but I would take it to the next step. Just as Paul Volcker suggests, we need to restructure our financial system: we can offer a safety net to those institutions that perform “basic” banking functions (e.g. take deposits, write loans, etc.) BUT if the institutions gets involved in more risky activities (Volcker mentions trading but this could be extended) then these entities should be on their own – no more taxpayer bailouts for excessive risk taking.
Taxpayer support should only go to those institutions that are providing much needed banking services…and they will be overseen by professional (and well compensated) regulators.
These are the type of discussions that we should be having in Washington…sadly, we are not.
Community Matters 
Michael Brandl makes sense and I can’t believe people in Washington don’t understand this.
I wish the public discussion wasn’t couched in moral language, where “greed” caused the problems and Wall Street claims that they’ve learned their lesson and won’t do it again. It was a system failure and the system should be fixed.
The financial crisis wasn’t an act of nature like a hurricane or earthquake. It was human-made. We shouldn’t respond the way we do to a natural disaster – with aid to the victims but no attempt to prevent future disasters.
Reform of the financial system isn’t anti-business; it’s pro-business. We need Congress and the administration to recognize this and get to work.