Irresponsible financial regulation in the US has a good claim to being the main cause of the crisis. In its efforts to clean up the mess, however, the US leaves Europe in the dust: first by prying open bank balance sheets and forcing them to take capital injections; now by entering the final straight of legislating regulatory reform. But even reconciling the reform bills of the two chambers of the US Congress is merely a first, insufficient, step at making future crises less likely.

The members of Congress opted to empower regulators to restrain financial institutions' most harmful behaviour, rather than fixing the restraints in the law itself. It is left to the discretion of regulators to determine whether an institution is systemically risky and what to do about it when it is: in terms of capital ratios, break-ups and takeover by a resolution authority.

The advantage is that the new powers afford regulators the flexibility to tailor requirements as best fits the circumstances. This is also the disadvantage, since regulators will only exercise their powers in ways that have political backing. As the political benefit of being tough on bankers may never be greater than now, there is a real risk of future Congresses browbeating regulators out of using the tools it is now handing out.