Posted by: Theo Francis on October 28

The talk about a third bailout for GMAC couldn’t come at a much more awkward time for the Administration or Rep. Barney Frank (D-Mass.): They have just unveiled a package of regulatory reforms billed as the toolbox for solving the “too big to fail” conundrum.

Unfortunately, GMAC highlights its weak point all too clearly.

That’s not to say that the proposed legislation is useless. Even critics of the approach tend to agree that the federal government needs to do a better job of watching for financial-sector risks that could shake the economy, and needs better tools to do that, as well as to dismantle big and complex firms before they threaten serious harm. Systemic-risk monitoring and resolution authority...