Geithner: There's a lot of power in his hands, and more's on the way.

Barack Obama's power trip against the SEC would give the banks that melted down Wall Street even more clout than they already had and still have.

You can see the giant handprints of Treasury Secretary Tim Geithner (a former top Fed official) and his coterie of banking industry advisers ("Geithner's inner circle jerks") all over this plan to strip the SEC of some of its regulatory power and give it to what he describes as a "retooled" Fed.

The SEC has its problems, as whistleblower Harry Markopolos so bluntly pointed out, but the Fed has a radically different setup — the banks themselves have a formal say in who serves on the regional Feds. Geithner himself had to formally pass muster with the banks when he became chair of the New York branch of the Fed, the job he held before becoming Treasury secretary.

Geithner was close enough a pal of Wall Street's banks to be heavily courted to run Citigroup by its former CEO Sandy Weill and to have advocated ways to reduce the amount of capital required to run a bank (the opposite of his current policy). See "Geithner, Member and Overseer of Finance Club," a good New York Times piece from last month, for details.)

It's one thing to have the Fed focus on the flow of money; it's another thing altogether to have it also step in as a regulator of the banks. In general, you could argue that the banks would be regulating themselves.

More on the Fed from Eliot Spitzer here ("Fed Dread"). The ex-governor has always had a lot to say about financial issues — other than how much to pay prostitutes. And a good Seeking Alpha piece, "The Bernanke Fed's Bogus Transparency," points out the Fed's built-in secrecy — the SEC may have its problems but at least it doesn't operate that way. As the Seeking Alpha piece says about the Fed:

A more benign view of the Fed is available here, but for a better overall look, check out Arohan's "Get Ready for a Changing Regulatory Environment," which gives some good background on both the SEC and Fed.

Resistance from the SEC is futile, but it's already fierce: Obama's new SEC chair, Mary Schapiro, has already gone public with her disagreement with her boss, as the Wall Street Journal reports this morning ("SEC Objects to Idea of Losing Some Oversight Power").

Obama's plan may face "big hurdles," but the SEC's resistance is likely to be futile because it has been at least a good enough regulator to not have many allies on Capitol Hill or in the banking industry.