Financial regulatory “reform” is beginning to look a lot like the status quo. We’ve already heard that the proposed Consumer Financial Protection Agency would be housed inside the Federal Reserve, which already held responsibility over consumer protection (and failed miserably at the task). Now the Financial Times reports that the Fed will also keep their supervision over the biggest banks, another area in which they failed but will face no diminution of power.

Chris Dodd … is set to propose this week that the 23 largest institutions stay under the Fed’s oversight … At issue … was the regulation of several hundred state chartered institutions that also want to remain under the Fed’s supervision.

“The Fed feels it is gaining some momentum,” said [an unidentified Senate aide].

As Yves Smith says, the Fed simply is not a functioning agency to check industry abuses. Heck, the largest banks pick their preferred officials for the top positions as the regional bank Presidents. “Keeping them in charge of bank regulation is like reappointing a fire commissioner who let half the town burn down,” she concludes.

The difference between countries who failed during the financial crisis and countries who kept their footing, when it comes down to it, is the presence of a strong regulatory framework, and also strong regulators who were not captured by the industries they were supposed to be regulating.

So what can we learn from the way Ireland had a U.S.-type financial crisis with very different institutions? Mainly, that we have to focus as much on the regulators as on the regulations. By all means, let’s limit both leverage and the use of securitization — which were part of what Canada did right. But such measures won’t matter unless they’re enforced by people who see it as their duty to say no to powerful bankers.

That’s why we need an independent agency protecting financial consumers — again, something Canada did right — rather than leaving the job to agencies that have other priorities. And beyond that, we need a sea change in attitudes, a recognition that letting bankers do what they want is a recipe for disaster. If that doesn’t happen, we will have failed to learn from recent history — and we’ll be doomed to repeat it.

Well, the unfolding nightmare of the Dodd draft indicates that we’ve failed to learn. His quest for bipartisanship rather than putting up a bill on which Republicans would have to make a choice, and then running on the outcome has led to a financial “reform” little changed from the structure that oversaw a massive collapse.