Jun. 28--Companies too big to fail will be propped up, paving way for next crisis and bailout.

What the country needs is a safe, sane financial system that doesn't regularly blow itself up thanks to greed and irresponsible risks. What the Obama administration has proposed as regulatory change does not offer that. But, it's no surprise. Some of same officials that crafted the regulatory proposals -- such as Lawrence Summers, Obama's chief economic advisor -- helped create the climate that caused the financial meltdown. As President Bill Clinton's Treasury secretary Summers scuttled, in the name of free markets, proposed regulation of the complex derivatives that were at the heart of the subprime mortgage debacle.

Obama's proposal would give consumers more protections from predatory lending. It expands the scope and authority of the Federal Reserve to intervene at failing financial institutions. It requires banks to hold onto some of the mortgages they issue in an effort to make them to lend more responsibly. Further, banks would have to hold more cash to protect against defaults.

Hedge funds would be lightly regulated. Their books would be open to government inspection. Little would be done to restrict or govern the use of complex derivatives like those that forced the $182.5 billion government bailout of American International Group.

Credit rating agencies, like those that gave their stamp of approval to the toxic junk AIG was trading, will continue to be paid by companies to rate the companies' debt offerings.

One of the more tepid proposals is giving a company's stockholders more say in executive compensation. Obama said nothing about rolling back the 1995 legislation by U.S. Sen. Christopher J. Dodd, the Private Securities Litigation Reform Act, that makes it nearly impossible for defrauded investors to recover their losses through lawsuits.

The government bailed out AIG -- along with Citigroup, Bank of America and others -- because they were judged too big to fail. But, Obama's proposal guarantees future bailouts by propping up rather than dismantling institutions whose sheer size, in case of a failure, could bring down the whole financial system. That is not reform, it is papering over the likelihood of a future financial crisis.

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