Overhauling the regulation of the financial system is no small thing. So President Barack Obama's economic team is unveiling it in stages, starting with broad outlines instead of draft legislation.

U.S. Treasury Secretary Timothy Geithner unveiled an overall framework on March 26, 2009. The framework lists four core areas for reform: identifying systemic risk; protecting consumers and investors; eliminating gaps in our regulatory structure; and fostering international coordination.

Geithner discussed details on identifying systemic risk and promised the other sections would be fleshed out in the weeks ahead.

To address systemic risk, Geithner called for several changes to current law. He wants expanded regulatory power over financial firms other than banks, to oversee any "systematically important firm." Identifying those firms should be based on what they do, he said in testimony before Congress. 

"We must end the practice of allowing banks and other financial companies to choose their regulator simply by changing their charters; regulators must choose who to regulate," he said.

The government should also raise standards on capital and risk management; require the registration of hedge funds with assets under management above "a moderate threshold," begin comprehensive oversight for the over-the-counter derivatives market, and enact new requirements for money market funds.

We should emphasize that the Obama administration seems to be laying out guiding principles before draft legislation is made public. In other words, Obama has a long way to go. But the process has begun, and there seems to be broad agreement in Congress that some sort of regulatory overhaul is necessary. For now, we rate this promise In the Works.