In October of 2008 Alan Greenspan conceded that an unregulated free market would not regulate itself as a matter of self-interest on its own part...

“Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief,” he told the House Committee on Oversight and Government Reform.

Greenspan was testifying before Congress in the wake of the housing crisis, problems with the creative structuring of financial derivatives, the credit crunch, record bank failures, and the collapse of financial institutions like Lehman Brothers.

There was little doubt that Congress would eventually begin reimposing regulation on the financial sector after a couple of decades in which a Reaganesque philosophy of deregulation gave the financial industry more and ore freedom.

Now Connecticut Senator Chris Dodd (D) who chairs the Senate Banking Committee has come out with a sweeping new banking bill that would consolidate financial regulators under a single agency, increase the amount a capital a bank is required to keep on hand, and reform the derivatives market.

Most analysts agree that it is a start point. It will be interesting to see how the 1,100-page bill evolves as the committee considers it...