David Frum
David Frum - 
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Kai Ryssdal: Christopher Dodd said today it may be early next year before the Senate gets around to figuring out new rules for the financial industry. The chairman of the Senate Banking Committee told CNBC this morning in almost as many words that you just don't want to go to fast on these sorts of things.

Commentator David Frum says we're going to need more than new rules, whenever we get around to them, to prevent the next crisis.

DAVID FRUM: Are we in danger of learning the wrong lessons from the banking crisis? President Obama is pushing for tighter regulation of U.S. banking -- maybe to look more like Canadian banking, which has largely escaped the current crisis.

But is regulation really the story here?

Like the United States, Canada dropped the barrier between commercial and investment banking. Like the United States, Canada also allowed banks to take more risk: at the peak of the boom, Canadian banks were borrowing 18 times their equity, a ratio that looks cautious only compared to the even more zany ratios that prevailed south of the border.

No, there are two very different lessons to learn from Canada.

First: Canadian banks are stronger than U.S. banks not because they are more regulated, but because they are more diversified. Unlike, American banks, chartered by states and concentrated in certain regions, Canada's big banks are chartered by the federal government and do business on equal terms in every province.

Second: Canada escaped the United State's financial crisis not because of smarter bank regulation, but because of less stupid housing regulation.

The Canadian government did not press Canadian banks to extend zero down-payment mortgages: 20 percent down is the rule. In Canada, a mortgagee who cannot meet the payments does not just hand over the house keys to the bank. He or she hands over his or her checking account, and any other assets as well. Canadian home ownership rates approximate rates in the United States, but because mortgage interest is not tax deductible Canadians pay the full cost of ownership themselves and so tend to buy smaller homes than Americans do, about 1800-square-feet for the average new home, as opposed to the more than 2300-square-foot average in the pre-crash U.S.

A model to follow? Apparently not. We are eager to blame the banks for securitizing bad mortgages, not nearly so eager to put an end to the bad mortgages that started the trouble.

We want to hem banks in, not allow them to grow and diversify. We tell ourselves that we want solutions. But what we really want most is somebody to blame, meaning somebody other than ourselves of course.

RYSSDAL: David Frum is a resident fellow at the American Enterprise Institute.