The unbearable slowness of financial reform

Over the last few weeks, I have been reading Richard Rhodes' superb The Making of the Atomic Bomb. I was also teaching a class on financial crises last week in the BMSS summer school this year at CREI. One of the striking things is how little financial regulation has come out of the last financial crisis of 2007-08. The Great Depression gave us Glass-Steagall, the SEC, deposit insurance, and ~40 years without a single banking crisis in Europe or the US. Today, we are a full 6 years into the biggest financial crisis since the 1930s, and the proposed tweaks and twists -- read Basle III and related regulation -- are mostly puny. Some procyclical capital provisioning, ok; some limits to off-balance sheet exposures, tick. Serious rethinking of maximum size? Simple leverage limits? Massively higher equity cushions - no, none of the above. Debate is continuing... and it has for about the same length of time as it took to build the first nuclear bomb. As an advisor of mine once used to say "nothing important should take much longer than World War II"...