[ by Melanie Gretchen ] Sheila Bair is back in town and looking to pick a fight.  This time, she's not alone.  One year since she stepped down as chairwoman of the Federal Deposit Insurance Corporation, Ms. Bair is back in D.C. with a new private-sector group. Formed by the Pew Charitable Trusts, where Ms. Bair now works, and the CFA Institute, an organization of financial analysts and staffed by former regulators and officials, the Systemic Risk Council will monitor and encourage regulatory reform. "The great challenge is to devise a system to identify risks that threaten market stability before they become a danger to the general public.  We need a more effective and efficient early-warning system to detect issues that jeopardize the functioning of U.S. financial markets before they disrupt credit flows to the real economy.  And two of the most critical tasks are how to impose greater market discipline on excess risk-taking and effectively end the doctrine ‘too big to fail.’" Regulation Derailed. To be clear, what Ms. Bair takes issue with is the introduction of new regulation, which has not made it into the industry.  The Dodd-Frank Reform Act, passed in 2010, created the Office of Financial Research to help the newly created Financial Stability Oversight Council.  Composed of representatives from all major regulatory bodies, its job is to identify threats to financial stability and to decide which financial firms are systemically important, and how much additional regulation they should receive. According to Floyd Norris, chief financial correspondent of the NYTimes, "so far it has accomplished little."  He points out, though, to its credit, the Dodd-Frank Act did succeed in pushing through so-called living will for large banks rules on how the business of such a firm would be wound down if it failed. The State of Affairs. Yet, every silver lining faces a cloud.  While Dodd-Frank's Volcker Rule calls for barring banks from engaging in proprietary trading, it left to the regulators the responsibility to craft and adopt rules.  To date, proposals to enforce the measure have not gone through.  [C-I Note: Although, much of the delay can be attributable to political gesturing between Democratic and Republican lawmakers.] As Ms. Bair said, "nothing has been finalized.  F.S.O.C. is M.I.A.;  O.F.R. is barely functional.  The Volcker Rule is mired in controversy.  Securitization reform is stalled.  They haven’t even proposed new bank capital rules.  The public is becoming cynical about whether the regulators can do anything right, which is undermining support for reforms."  She added that regulators had so far missed two-thirds of the 221 deadlines for adopting regulations set forth in the law, according to a report by major law firm Davis Polk. Who's on Board at the Systemic Risk Council. Upon inception, the new group will begin issuing reports quickly.  A sampling of members, from both parties and major corporations, include:

• Former Senator Bill Bradley, (D-NJ)
• Former Senator Chuck Hagel, (R-NB)
• Former Senator Alan Simpson, (R-WY)
• Brooksley Born, former chairwoman of CFTC, who failed in her fight to deregulate under the Clinton administration
• Paul O’Neill, first Treasury secretary under George W. Bush
• John Reed, former head of Citicorp
• Hugh Johnston, the CFO of Pepsico
• Mr. Volcker, as senior adviser

John Rogers, the president of the CFA Institute and a member of the new group, spoke on the group's need.

"Despite the magnitude of the financial crisis, prospects for major reform of regulatory systems are inadequate and vague.  This council will serve as an essential sounding board for systemic risk reforms focused on strong investor protection, and offer a critical voice to promote the enforcement of regulations, financial disclosure and transparency."

For further details, go to [NY Times, 6/6/12].