Systemic weaknesses obama must remove

• The lack of an all-seeing federal entity to detect institutional stresses that threaten the financial system, and the government’s inability to step in and unwind large institutions before they choke the system

• The undercapitalisation of large financial institutions. Heading into the financial crisis, too many banks were leveraged with significantly more debt than equity

• The emergence of large, lightly regulated markets, such as hedge funds, and of big insurers, such as AIG, without a federal overseer

• Reckless credit and borrowings. Obama is likely to recommend creating a financial services consumer protection body with oversight powers over mortgages and credit cards and other consumer financial products