This brouhaha over the Boston Fed's rationalization for missing the housing bubble reminds me of a conversation I overheard a few weeks ago between a former Federal Reserve bank supervisor and his counterpart at the New York Fed.

I can't give you their names since they were conversing privately a few feet away from me before the start of a conference on financial regulation (nor can I give you the name of the confab since that would give their identities away), and I just managed to overhear the exchange.

Bankers in Europe are not confident in their risk management practices, according to a recent study by Oracle.

The study of 450 financial services and IT professionals at European banks found that almost half of respondents reported that they lacked confidence in the accuracy of counterparty and risk data that they used for risk analysis-a disturbing figure given the ongoing financial concerns in the region.

The latest revelations  concerning the dispute between AIG and Goldman over collateral show how weak the new financial reform package really is.

After all, Goldman's demands for collateral from AIG as it was failing ended up costing taxpayers billions of dollars. Yet according to the testimony today during the crisis panel's latest hearings, the whole question hinged on what constituted fair value.

Anyone counting on regulation alone to prevent the world from falling into another financial black hole will be sorely disappointed, a group of experts warned in an article published yesterday by the International Federation of Accountants.

The experts say that all key parties to the financial disaster--from regulators to managers and investors--share the blame and that tighter regulation alone can therefore go only so far to prevent another crisis from materializing. 

Anyone counting on regulation alone to prevent the world from falling into another financial black hole will be sorely disappointed, a group of experts warned in an article published yesterday by the International Federation of Accountants.

The experts say that all key parties to the financial disaster--from regulators to managers and investors--share the blame and that tighter regulation alone can therefore go only so far to prevent another crisis from materializing. 

While many critics claim the financial regulation bill that emerged from Congressional negotiations on Friday will do next to nothing to reduce the chances of another banking crisis, there are some limits on risk taking that could do just that.

The one that strikes me as the toughest and most critical is the so-called Lincoln amendment, which would require banks to separately capitalize their trading in credit default swaps, which were central to the recent crisis.

A panel sponsored by the Securities Industry and Financial Markets Association on Monday on what banks can expect from financial reform warned that higher capital reserves and other limits Congress imposes on their profitability would hurt the economy as they curbed their ability to lend.

Several panelists, including Adam Gilbert, head of regulatory policy in the corporate risk management group of JP Morgan Chase, and Gary Mandelblatt, chief risk officer of Nomura, warned repeatedly of such "unintended consequences" from financial reform.

The challenges of managing systemic risk became starkly apparent during a panel discussion held this morning by the Securities Industry and Financial Markets Association.

In fact, the panelists agreed that the challenges are so immense that it's difficult to see how financial reform can succeed without limits on the size as well as the interconnectedness of financial firms, though some were more reluctant to impose such limits than others.

With banks continuing to fail in the US and fears growing over European ones, companies are once again taking a deeper look at their banking partners to ensure they have optimal cash management arrangements and are partnering with strong, secure banks that will be around to support the services and products those companies are using.

Many multinational companies are nonetheless looking to reduce the number of banks at which they hold accounts and move to a more streamlined account configuration with a few large global or regional banks.

As a follow-up to yesterday's rant, I see that investors are applauding the moves of European governments to reduce their budget deficits, as if the answer to deflation is more deflation.

Hasn't anyone ever heard of Keynes and the false dawn of 1937?