[JURIST] US financial regulators and scholars advised [hearing materials; recorded video] the Senate Banking Committee [official website] on Thursday that "safety and soundness" can be restored to the financial system through increased regulatory oversight, but did not agree on the form that oversight should take. In his opening statement [text], committee Chair Christopher Dodd (D-CT) [official website] expressed doubt about the Obama administration's plan to control systemic risk to the economy by charging a Federal Reserve [official website] advisory panel with overseeing certain financial companies:

The Fed hasn't done a perfect job, to put it mildly, with the responsibilities it already has. This new authority could compromise the independence the Fed needs to carry out effective monetary policy. Additionally, systemic risk regulation involves too broad a range of issues for any one regulator to oversee.

Carnegie Mellon University Professor Allan Meltzer [academic profile] commented [transcript, PDF]:

[E]ffective regulation should await evidence and conclusions about the causes of the recent crisis…[R]eform should start by increasing a banker's responsibility for losses. The administration's proposal does the opposite by making the Federal Reserve responsible for systemic risk.

Securities and Exchange Commission (SEC) [official website] Chair Mary Schapiro [official profile] advocated [transcript, PDF] for increased regulation, transparency, and enforcement [JURIST report]:

[M]ajor institutions engage in enormous, virtually unregulated trading in synthetic versions of other, often regulated financial products. We can do much to reduce systemic risk if we close these gaps and ensure that similar products are regulated similarly.

Earlier this week, the US Court of Appeals for the District of Columbia Circuit remanded for reconsideration [opinion, PDF; JURIST report] a rule [Rule 151] intended to fill such gaps in the "existing patchwork of state insurance laws." Last week, Chicago Board Options Exchange [corporate website] CEO William Brodsky appeared before the US House of Representatives Committee on Financial Services to call for the merger [testimony, PDF; JURIST report] of the SEC and the Commodity Futures Trading Commission (CFTC) [official website]. Brodsky agreed with the Obama administration's position that a single authority should be assigned to supervise firms that potentially pose a risk to financial stability. He asserted that failing to modernize the current regulatory system has resulted in unregulated gaps, market congestion, and a lack of regulatory perspective. Last year, then-Treasury Secretary Henry Paulson Jr. unveiled a plan [JURIST report] to merge the SEC and CFTC to overhaul the nation's financial regulatory system.