We're still keeping an eye on the pace of the reorganization of the financial regulatory structure over here, and I thought it might be interesting to take a quick look at the tenor of the arguments for regulatory reform.  Interestingly, the Paulson blueprint doesn't spend a lot of time on the current financial crisis, although that surely played a role in the timing of its release.  Instead, it spends plenty of time outlining the patchwork history of financial regulation, with an aim to show that the current regime is more a product of path dependent happenstance than considered reflection.

But why regulate now, given that the system was just as patchworky a decade and two decades ago?  The blueprint also seems animated by a fear of globalization, and a sense that agencies ought to provide a regulatory environment in which American markets can compete successfully with foreign ones:

Globalization of the capital markets is a significant development. Foreign economies are maturing into market-based economies, contributing to global economic growth and stability and providing a deep and liquid source of capital outside the United States. Unlike the United States, these markets often benefit from recently created or newly developing regulatory structures, more adaptive to the complexity and increasing pace of innovation. At the same time, the increasing interconnectedness of the global capital markets poses new challenges: an event in one jurisdiction may ripple through to other jurisdictions.
...
These developments are pressuring the U.S. regulatory structure, exposing regulatory gaps as well as redundancies, and compelling market participants to do business in other jurisdictions with more efficient regulation. The U.S. regulatory structure reflects a system, much of it created over seventy years ago, grappling to keep pace with market evolutions and, facing increasing difficulties, at times, in preventing and anticipating financial crises.
Largely incompatible with these market developments is the current system of functional regulation, which maintains separate regulatory agencies across segregated functional lines of financial services, such as banking, insurance, securities, and futures.

(emphasis added).  There's no doubt, as I've written before, that globalization is exposing regulators to unprecedented challenges, and in some ways I'd expect to see it invoked in any argument for change.  But I note that in the Blueprint, globalization is presented not as a "bring it on" opportunity for further American financial triumphs, but as the cause of American financial problems.

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