Grim experience invites the toughest federal financial reforms

AS Congress debates differences in the Senate and House financial reform bills, taxpayers need to remember the $2 trillion they put up to keep the economy from a thunderous crash during 2008.

Reconciling the legislation, with an eye toward getting it to President Obama by early July, requires vigilance and care.

The wailing echoing from Wall Street and the banking industry over new regulations suggests lawmakers are headed in the right direction. As a rule of thumb, where the bills differ, go with the strictest enforcement.

A new requirement for mortgage lenders is symbolic of the scandalous behavior and cynical attitudes in the U.S. financial community during the madness. Congress is reduced to directing lenders to obtain evidence from borrowers they will be able to pay their mortgages. What a novel concept.

Key measures in both pieces of legislation look to create bodies to keep an eye on segments of the economy that amply demonstrated they could not be trusted to operate independently. Other language seeks to enforce rules that were ignored even by regulators.

The Senate creates a Financial Services Oversight Council and the House proposes a similar model. The goal is for the heads of key agencies to scan the horizon for trouble and share information.

Both houses of Congress create a consumer finance protection mechanism. In the Senate it would be under the Federal Reserve, and it is a stand-alone agency in the House. Maximize federal leverage to protect consumers and small business. Toward that end, efforts to reform debit and credit card swipe fees must be in the bill that goes to the president.

Proposed legislation would force banks and bank-holding companies to set aside more of their own money to cover their own risky behavior, and prohibit some of the rankest, speculative gambles. Washington Sen. Maria Cantwell is a loud, constructive voice for tighter regulation of derivatives.

Rating agencies, Wall Street's incarnation of the world's oldest profession, could no longer sell favors to the highest bidders.

Anyone shocked by rigorous federal oversight, ought to be equally dismayed it is so obviously needed.