Opinions are like noses, right? Everybody's got one.

Rochdale Research's Dick Bove thinks the banking system is far more sound than politicians and pundits are giving it credit for. Former Oppenheimer analyst Meredith Whitney thinks 2009 will be tougher for banks than 2008. Treasury Secretary Tim Geithner thinks he has a plan to address the crisis, while Nobel Laureate Paul Krugman (among others) thinks Geithner has solidly missed the mark.

And somewhere in the background, Goldman Sachs (NYSE:GS) and Bank of America (NYSE:BAC) are claiming to be moving toward returning TARP funds.

What in the name of Pete is going on here?

That's a question regulators and government officials need to step back and consider before slapping together regulations that may or may not address the root of today's problems. Let me be clear -- I do think new regulations are in order, but they don't need to be in place at 3 p.m. tomorrow. 

Here are a few things that our policymakers should be considering when crafting these new regulations.

Too big to fail
Too big to fail has become a rallying cry for increased government regulation, but do we really have a clear sense of what that phrase means? B of A was too big to fail, as was Citigroup (NYSE:C) and AIG (NYSE:AIG). If we had it to do over again, would Lehman Brothers have been deemed too big to fail? And how about General Motors (NYSE:GM)? Is too big to fail the explanation we're pinning on that bailout?

And of course, while too big to fail sounds like a good, concise explanation, is it really the right one? Perhaps "too interconnected to fail" would make more sense. In either case, it seems like figuring out exactly what too big to fail means, how companies got too big to fail in the first place, and how we can keep that in check without unnecessarily crimping the financial system would be a good idea.

Levered to the hilt
If nobody ever took risks, our economy might look more like Soviet-era Russia than what we've actually managed to build. So perhaps we shouldn't be too concerned that companies like Bear Stearns, Morgan Stanley (NYSE:MS), and Goldman Sachs took risks.

What seems to have turned risk-taking into supersized calamity, however, is the massive amounts of leverage (that means debt) that these financial players took on. Goldman was the least leveraged of this group at the end of 2007 and its assets were more than 26 times its equity. Should there be a limit on financial company leverage? Where do you draw the line on such regulation? And I'm not looking for the first answer that makes sense to Geithner; let's take some time to figure out the right answers.

Credit default swaps
Do I really need to say more about CDS contracts? Berkshire Hathaway's (NYSE:BRK-A) Warren Buffett called them "weapons of financial mass destruction" and they seem to be living up to that label. The proposed exchanges that will make CDS dealings more transparent are a step in the right direction, but there are still concerns over the speculation that's occurred on the CDS market.

Given the way the government has handled the situation at AIG -- easily the biggest victim of CDSes gone wrong -- I'm skeptical that government officials understand the CDS market well enough to make new rules regarding swaps. Once again, let's step back and figure out what went wrong with CDSs and what the reasonable uses of swaps are before we loose the iron fist on them.

In some cases we may have had the necessary regulatory framework already in place, but at some point it was rolled back. In 1999, for example, the provisions of the Depression-era Glass-Steagall Act, which prohibited banks from owning nonbank financial companies, were changed by the Gramm-Leach-Bliley Act.

I'm sure it's great fun for Congress to come up with new legislation they can slap their names on, but maybe before breaking out fresh ink we should be looking back to regulations like Glass-Steagall, which hadn't outlived their usefulness. 

You can't hurry regulation, no you just have to wait
The bailout of the financial system has so far been a pretty unmitigated mess. As a supporter of a good portion of the bailouts, though, I'd argue that we had a clock ticking on a lot of the financial sector collapses, so action had to be taken swiftly.

That's not the case when it comes to crafting new regulations to try and prevent this all from playing out again. The less time we spend figuring out what the root causes of the disaster are and contemplating the best ways to protect our system, the more likely we are to end up with a shoddy regulatory framework that will either hobble the system or be easily circumvented in the future.

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