Hard on the heels of health care reform comes an equally big task: rewriting rules for the nation's largest financial institutions. Two years after the federal government spent $30 billion to bail out Bear Stearns — the first casualty of the financial calamity — it's time.

But a bill that passed the Senate Banking Committee on a party-line vote Monday should be strengthened. Depositors and investors were wounded when credit froze in the fall of 2008, and so far, nothing has been done to modify the rules that allowed it to happen. Chief among them: institutions that are too big to fail.

The bill, which was sponsored by Banking Committee Chairman Chris Dodd, D-Conn., would attack the problem by establishing a panel of regulators that could insist that any institutions seen as systemically important be regulated by the Federal Reserve. If such companies get in trouble, the Fed, along with the Federal Deposit Insurance Co. and Department of the Treasury, could seek an orderly liquidation of the company's assets. Large financial companies would have to pay into a "resolution fund." The process, while sensible, also seems clunky and could be improved.

The bill also sets up a consumer protection agency housed at the Fed. This seems like half a loaf after President Barack Obama promised a freestanding consumer watchdog. The bill attempts to insulate the agency within the Fed, but there is reason to be concerned about its independence. It should be autonomous and have the ability to enforce its rules.

The bill tries, and mostly fails, to regulate the derivatives market. Until these investments are required to trade on transparent and regulated exchanges, they will cause problems that will be hard to identify until it's too late.

Finally, the bill would codify the so-called Volcker rule, named for former Fed chief Paul Volcker, which would ban the big banks from investing in or sponsoring a hedge fund or a private equity fund or from operating proprietary trading in their own accounts. The rule would allow for some daylight between investment banks and commercial banks and, if implemented, would be a good thing. But the Dodd bill calls for a six-month study of the idea followed by three months of implementation. If it's such a good idea, the government should move much faster.

The Dodd bill seems well intentioned but weak. Surely, after witnessing the near collapse of the American financial system, Congress can do better.

REPRINTED FROM THE MILWAUKEE JOURNAL SENTINEL.