Much of the current financial crisis is attributed to the failure of "credible" regulatory oversight. This article addresses the difficult and unresolved question of how to achieve credible regulatory oversight that provides meaningful control of the nations' financial infrastructure and at the same time preserves self-regulation, innovation and growth in the marketplace. The oversight question is generally framed in terms of identifying a corporate or market disaster and then reflecting upon what is needed to make oversight work, without any real understanding of the boundaries of regulatory authority and the systemic problems impacting the probable success of regulatory oversight. While a valuable exercise in scholarship, its shortcoming is that it is like trying to fix a watch without first understanding all of the moving parts. The article undertakes a comprehensive examination of the current regulatory status quo, including the recent changes made by the Wall Street Reform and Consumer Act legislation. Newly compiled regulatory agency data is compared and analyzed to provide a clear understanding of "how" things work before trying to figure out "why" the regulatory oversight mechanism periodically breaks down. In navigating a possible solution to achieving the goal of credible regulatory oversight, the analysis also takes into account certain powerful externalities including legal, private sector, political, and market forces that frequently overtake oversight authority and directly impact the probability that regulators will succeed in competently performing their function in conformity with legislative models.
