Treasury secretary Henry Paulson was right about one thing when he introduced his sweeping 218-page overhaul of our financial regulatory system: The midst of a financial crisis is no time to do it.

Paulson and the White House seem resigned to the prospect that if broad reforms are to be enacted, it will be the next president and the next Congress who will do so.

A long, cool, skeptical look at the overhaul is in order if only because it not only greatly expands the authority of the Federal Reserve but also over time might fundamentally change the character of the central bank. And, we might keep in mind, the Fed by design is not the most transparent of institutions. That serves it well as steward of the nation’s currency, not so well as overseer of the financial markets.

Certainly it might be worth seeing how the Bear Stearns mess plays out. Whether the $30 billion infusion of taxpayer money was a well-crafted, one-time bailout — Chrysler and Mexico come to mind — that prevented further damage to the system, or whether we’ve set a bad precedent for rescuing investment banks from their own recklessness.

Streamlining the regulatory structure sounds like a good idea and so does extending federal oversight over previously unwatched institutions like hedge and private equity funds but this broader purview doesn’t seem to be backed up by additional regulatory muscle.

The Bush administration is unashamedly regulation-averse and it’s a fair question to ask whether an aggressive use of existing regulatory powers might have ameliorated the current credit meltdown. Paulson says no “I do not believe it is fair to blame our regulatory structure for the current market turmoil,” he said. Market cycles happen, but it’s hard to believe no one in a position to act saw this coming.

Reform advocates would argue that the two are unrelated, but politically, Congress isn’t going to do anything for the big guys until it can credibly claim it has done something for the little guy — namely, government help with foreclosures.

The issue for the lawmakers will be the same, only writ small: Striking a balance between good public policy — keeping people in their homes, healthy financial markets — and underwriting imprudent speculation, thus setting ourselves up for another debacle.

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