Rep. Barney Frank (D-MA) speaks during a news conference on Capitol Hill on regulation of the financial system -- November 3, 2009
Rep. Barney Frank (D-MA) speaks during a news conference on Capitol Hill on regulation of the financial system -- November 3, 2009 - 
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Kai Ryssdal: It was totally unplanned but that last line of Steve's piece, the bit about more regulation? That happens to be exactly where we're going now. Because the House Financial Services Committee started wrestling with the Financial Stability Improvement Act today. It's supposed to coordinate changes to government regulations for everything from banks to stock brokers and rating agencies -- the whole ball of wax. That's a lot to cram into one piece of legislation, but Congress has had more than a year to work on it. It's been 14 months since Lehman Brothers collapsed. And the legislative sausage-making has left some wondering whether anything will make a real difference. Our Washington bureau chief John Dimsdale reports.

JOHN DIMSDALE: The House bill sets up a consumer financial protection agency and a council of regulators to keep an eye on risks to the entire banking system. But some reform advocates say there are too many loopholes and exemptions to really change business as usual on Wall Street.

Heather Booth of the grass-roots Americans for Financial Reform fears special interests will defeat real change.

HEATHER BOOTH: This is really a David and Goliath fight of enormous resources from the Chamber of Commerce and the largest banks and the financial industry, against Main Street.

But Booth is optimistic Congress will protect consumers from risky financial products and will find a way to unwind struggling big banks without taxpayer bailouts.

Douglas Elliott watches reform efforts at the Brookings Institution. He thinks the legislation will force banks to set aside more reserves so they can survive hard times.

DOUGLAS ELLIOTT: That makes a major difference in how safe financial institutions are. That is virtually certain to happen, and it's very important. If I could only do one thing, that's the one thing I would do.

But reform advocates criticize lawmakers for not taking stronger action against powerful big banks. At a press conference yesterday to kick off his committee's deliberations, chairman Barney Frank seemed a bit defensive.

BARNEY FRANK: People have said break 'em up. Well, I don't know anybody who can tell me in the abstract how to break 'em up.

He said the new systemic risk regulators will have the power to stop any big bank behavior that threatens the economy. For reform advocates the question is, will they use it?

In Washington, I'm John Dimsdale for Marketplace.