The Gramm-Leach-Bliley Act allowed financial services firms to offer a wide array of products but did not significantly alter the way financial services firms and products were regulated. As a result, a company like AIG or Citigroup must deal with over 115 state and federal regulators if they want to operate in all 50 states.

While the functional regulators do regulate some risks, they do not necessarily consider all the risks posed by a firm or product. For example, the SEC does not really engage in prudential regulation while the banking regulators are so concerned about prudential risks that they frequently fail to adequately address market conduct risks.

Almost 50 nations use either a single regulator or a semi-integrated regulator (including major competitors like the UK, Japan, and Germany) and some have been doing so for over twenty years. I don’t believe that we need to continue to wait and see how they work out before acting.

Consolidating our regulators poses both benefits and problems, which I have outlined in some detail in my article on creating a single US Financial Services Authority available at SSRN: http://ssrn.com/abstract=757010

On the whole, I think that the benefits will out weigh the costs.