WASHINGTON (CNNMoney.com) -- One Federal Reserve governor thinks the Wall Street reform bill hands big banks a sweet deal. A Nobel Prize winning economist thinks regulators get too much discretion. And a high-profile investment strategist dubs the whole thing "wimpy."
After some 18 months of crafting the big fix to prevent the next financial crisis, Congress finally is poised to overhaul financial regulation. Some 40 lawmakers hope to finish merging two similar bills by the end of the month.
But some of the nation's top financial experts and economists, while supporting some of the legislation's provisions, caution that it could fall flat and fail to prevent the next financial crisis and another round of big bank bailouts.
They warn that the legislation leaves in place a financial system that favors Wall Street over small banks, and leaves decisions about when the government should intervene in the hands of many of the same regulators who screwed up in the first place.
"It seems very flimsy to me," said Richard Bernstein, chief executive officer of Richard Bernstein Capital Management LLC. "Do we want our financial institutions to be trading houses? Or do we want our financial institutions to allocate capital efficiently so we can have a productive economy? I think that has been lost on Washington."
In a speech earlier this month, Dallas Federal Reserve chief Richard Fisher complained that failing big banks were allowed to "lumber on" even as smaller banks were taken over. The system, he said, now favors the big guys.
"As a result of public policy, big banks have become indestructible," Fisher said. "And as a result of public policy, the industrial organization of banking is slanted toward bigness."
Fisher and Bernstein both acknowledge that the bill would establish a formal process to let regulators euthanize big banks. But both doubt that the big guys will actually be allowed to fail when a crisis hits.
The financial overhaul doesn't do much to sever the ties among the biggest banks or their ties to the economy as a whole, the critics say. If one megabank collapses, others might also. The reforms don't set hard limits on the amount banks can be exposed to each other, Bernstein said.
"Quite unfortunately, large banking companies have organized themselves in ways that entail significant spillovers to other financial firms and the economy, thereby making a bailout, in many cases, the only credible choice for policymakers," Fisher said.
Even former Fed Chairman Paul Volcker, widely praised for his push to end taxpayer support for banks that own hedge funds, acknowledged his doubts that regulators would allow the largest banks to fail without any help.
He said in an interview with CNBC that the new government takedown process is workable "for anything short of these biggest banks." But, he added later, "I don't see any other way to do it."
Bernstein also doubts that the reforms will prevent government officials from saving big banks. He calls the financial sector "dysfunctional," and he's a believer in re-erecting a firewall that existed from the 1930s through the late 1990s separating commercial banks that take deposits from investment banks that can make risky bets.
"We've lost sight of what the role of the financial sector should be in the economy," Bernstein said.
Critics see one other failing of the legislation: Most of the new rules requiring banks to bulk up capital and curtail risky behavior will be left to regulators to monitor and decide.
Congress will give regulators power to make such demands, but does not give them specific marching orders.
"One needs to hard wire as much of the regulation in place," economist and Columbia University professor Joseph Stiglitz said last week. "There's good reason to be suspicious that if we delegate to [regulators], we'll have the same kinds of problems we've had in the past."
Fisher also warned that lawmakers leave regulators "wiggle room to perpetuate" the concept of "too big to fail."
"Why should we think the future could, realistically, be any different - especially with even bigger banks that dominate the financial landscape today?," Fisher asked.
Lawmakers have recognized that the legislation gives regulators wide discretion and are leaning toward tightening it up, at least in one case.
The original version of the so-called Volcker rule left it to regulators to figure out how to craft a ban on banks' proprietary trading.
But top negotiators, including the leader of the conference, Rep. Barney Frank, D-Mass., have said they think lawmakers will embrace a tougher version that would remove some of that regulator discretion.
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