The Obama administration's New Foundation for financial regulatory reform aims to "provide the government with the tools it needs to manage financial crises." In framing the discussion in terms of "new tools" the proposal implicitly repeats the Great Lie of last year's bailouts: Namely, regulators lacked sufficient powers to manage the crises.

The perversity of the proposal is evident in the enumeration of powers requested. Under the plan, regulators would be given the authority over bank holding companies to establish receivership, provide loans, purchase assets, guarantee liabilities, or make equity investments. But Lehman went bankrupt, AIG received a loan, Bear's assets were purchased, Goldman's liabilities were guaranteed, scores of banks have been placed in receivership and...