What to do about 'Regulator Shopping'?

Thursday's NY Times has an editorial on "regulator shopping", investigating its role in the current financial crisis. The piece laments the fact that banks and finance companies were allowed to choose their own regulator and seemed to switch at will in order to find the most lax or favorable overseer. The editorial really takes issue with the "optional federal charter" proposal to regulate the insurance industry which would would allow insurance companies to switch to federal regulation if they had issues with state oversight (the current environment) in the future. There has been much outcry about regulator shopping and how it may have played one body off another in contributing to the crisis. So, if the Obama administration and Congress are serious about simplifying and streamlining financial product regulation and consumer protection, this would be a good time to step up.

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• William Poole examines "too big to fail" in the FT. He ponders whether bankers would rather face the discipline of subordinated debt or much heavier regulation from Washington.
• Is LIBOR signaling that risk in the banking system has abated? Michael Mackenzie explores the issue but still finds dislocation in some areas.
• S&P's threat to downgrade the UK from AAA upset the markets on Thursday.