Concerning system risk, connections, practices matter almost as much as size

That's because it's entirely possible that companies exist that are not 'enormously big' i.e. that are comparatively modest in size, but that are so interconnected to the financial system that they, too, pose unacceptable systemic risks.

Further, if necessary, a way must be found to, if not separate commercial banking (FDIC-insured) from investment banking (non-insured), then to compartmentalize investment bank losses so as to prevent the U.S. taxpayer from having to bail-out bad investment banking deals, high-risk trading strategies, and other executive excesses. It's up to Frank's committee to determine whether portions of the Glass-Steagall Act of 1933 should be re-instituted to achieve the separation goal.

And, of course, the legislation must be broad enough to include reviews of insurance companies. AIG (AIG), after-all, was, in theory, an insurance company. As investors -- and now U.S. taxpayers know -- AIG, in fact, via enormous numbers of credit default swaps, among other instruments, was de facto a large hedge fund.

Make that now a large hedge fund owned by U.S. taxpayers, as a result of the 79.9%, $182.3 billion U.S. government stake in AIG, which underscores the need to empower regulators to be able to review insurance company business models, as well.

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Financial Editor Joseph Lazzaro is writing a book on the U.S. presidency and the U.S. economy.