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GOP aside, financial reform was a no-brainer, wasn't it?

Fortunately, Maine's Republican senators could see that the financial system was out of control.

This week a landmark financial reform bill will be signed by President Obama -- fresh back from his Maine vacation.

The bill was months in the making, is complex enough to baffle most people without a doctorate in finance, and it was not clear until very recently that it would be possible to get a bill out of the Senate at all.

Only when three Republicans -- Maine's two senators, Olympia Snowe and Susan Collins, and Scott Brown of Massachusetts -- agreed to support the legislation was Senate passage assured.

Bravo for Snowe and Collins, because if one lesson could be learned from the financial meltdown in the fall of 2008 that nearly took the world economy with it, that lesson would be that many parts of our financial system were dangerously out of control.

Bankers, never known as the brightest people in the business, had been allowed, even encouraged, to place enormous risky bets with other people's money. The more bets, the more risk, the more money they made -- until it all collapsed like the Ponzi scheme it was.

Given this backdrop, how could anyone argue that the United States didn't need financial reform? Yet this, in essence, is what most Republicans have been arguing, bolstered of course by a banking lobby that takes a back seat to no special interest when it comes to funneling money to the "right" politicians.

According to most experts, the bill that the president will sign is reasonably balanced and certainly not overly penal to the finance industry.

Last week in The New York Times, Henry Paulson, Bush's treasury secretary at the time of the crisis, indicated that he thought the bill was sound in providing government with the necessary crisis powers that might have saved companies like Lehman Brothers and AIG -- the two companies whose demise triggered the crash.

Paulson feels that a key provision of the bill, establishing a risk monitoring group, also will be important in avoiding future crises.

I believe the most important feature of the bill is the provision to require open exchange trading of the exotic derivatives that were at the heart of the 2008 meltdown.

ensuring transparency and requiring the trading of these instruments through a third party who guarantees payment, we should have a system that works well for reducing overall risk -- which, after all, is the rationale for any kind of derivative product.

Commenting on this aspect of the bill last week, a prominent JP Morgan Chase banker noted that the best minds in the field have believed for years that this kind of reform was needed.

As sound and needed as this legislation is, it also suffers from the congressional tendency to run on and on -- adding lawyer-induced detail in mountainous quantity. This makes it difficult to judge potential unintended consequences and leaves the legislation open to Republican criticism of over- regulation and government stifling of the private sector.

This latter refrain, of government stifling private sector entrepreneurial spirit, is one with great resonance in the country just now. We have come through a very difficult economic time and while the economy is improving, job growth is still anemic. Many people are uncertain and nervous about the future.

A very old friend, who is an accomplished venture entrepreneur and Oxford University trained economist, wrote me last week lamenting the pending finance reform bill and its potentially negative impact on small banks in this country.

Here is a man who agrees that something must be done to make derivatives trading more open and less risky. Yet he sees the current bill much in the same way the Republican leadership is portraying it -- the heavy hand of government impeding the American entrepreneurial spirit. He even forwarded a chart that contrasted the 2,319 pages of this bill with the 66 pages of the last financial reform bill, Sarbanes-Oxley, passed in 2002.

This is a bit unsettling for me because I have little respect for the judgment of Republican leadership but lots of respect for the judgment of my friend. So while I would like to characterize opposition to finance reform as narrow-minded and overly influenced by the banking lobby, perhaps I am missing something.

Of course, there is always the chance that my friend has simply lost touch with that framework of logic and rationale that I used to attach to him. Or could it be me?

We are planning a weekend to resolve these issues in October.