Among the problems that crop up with the innumerable proposals for reregulating the banks on the blogosphere and in the MSM is that they too often ignore the political realities that have to be factored into any workable plan. Not that many don't have merit, just that they are practically impossible.

The administration and Treasury Secretary, Tim Geithner, in particular don't have that luxury. They have to come up with something that will get through Congress, that won't attempt to reconfigure an entire financial system in a year or less and that dovetails with the regulatory schemes of other countries.

In that vein, Geithner has introduced the his proposal for regulatory reform:

1) capital requirements that are designed to protect the stability of the financial system and individual banks. In other words, reduce the ability of banks to "accumulate" risk during boom times by requiring them to hold more capital during boom times.

2) all banks to hold more capital and the biggest banks to hold even more capital than that. No large financial companies should be able to evade these limits.

3) a greater emphasis on the quality of capital. Higher quality capital means it is better able to absorb losses. Voting common equity should represent a large majority of a bank's tier 1 capital.

4) risk-based capital requirements that reflect the risk of a bank's exposures. Reduce the reliance on a bank's internal models to dictate what their capital requirements should be. Regulatory capital ratios should reflect more accurate information about the health of a bank.

5) a way of addressing the huge problem caused by procyclicality, which essentially means that banks have little capital to spare when times are bad because they were able to hold less capital when times are good. This has been a huge issue that policy makers have struggled with for years, and Mr. Geithner has several pages worth of ideas on this front.

6) a "simple, non-risk-based leverage constraint." G-20 leaders have agreed to this in principle, but it has not yet been implemented. It would make it harder for banks to game risk-based capital standards because there would be a capital floor they couldn't fall below.

7) a conservative and explicit liquidity standard. This is something regulators have been emphasizing in the last year and many consider as important as capital standards.

ensuring that tougher capital requirements don't allow firms to migrate to places where such capital requirements don't exist.