"It has called into question the fundamentals of our system," a senior administration official said today about the nation's economic crisis.

The big debate: are the regulatory reforms the President intends to introduce today more like a Windows Service Pack upgrade than a whole new architecture and interface? FinReg 1.5 or FinRef 2.0? FinReg Vista? FinReg 7? (You get the idea.)

There will be complaints about specific provisions and their effects on risk-taking, but there is little in the reforms that will discourage the sort of responsible risk-taking that honest, capitalized firms tend to engage in. The administration seems to have resisted the temptation to shuffle the boxes on an organizational chart and call it an improvement. They identified the causes of the meltdown and came up with specific fixes. Arguably, they've also created backstops for future crises. This is the most ambitious and comprehensive reform since the 1930s; it involves some substantial streamlining and the creation of several new entities that could be be major stabilizing forces for generations

The administration is selling this to banks and Wall Street by pointing to the efficiency of creating a national bank regulator and by consolidating and updating rules and regulations. The administration is selling this to consumers by pointing to a new consumer protection agency that would guard against financial financial manipulation of consumers -- a consumer shied is what the White House will call it. This agency could become very powerful -- and it might be the overall headline of the series of proposals. It's the part of the proposal that Obama himself seems to be the most passionate about.

Congress is concerned about the power that the Federal Reserve will acquire under this scheme; the Fed is an agency that is not terribly responsive to policy-makers (and isn't set up to be.) The Fed has two charters now: it's responsible for making sure that the industry is functioning -- i.e., that it is growing and profitable -- at the same time as it is responsible, at least in theory, for tough new regulation. To that, the administration might note that consumer protection is being taken away from the Fed.

The government will create a new category of financial holding companies and hold them to higher capital requirements and subject them to tighter regulation -- and will empower the Federal Reserve to more closely supervise them. A new national bank supervisor will oversee all regulation of all federally chartered banks.

The administration will endorse the concept of "skin in the game" when it comes to the securitization market. They'll require the sponsor of a loan to keep at least 5% of the credit risk of the secruitized instruments.

Credit default swaps and over-the-counter derivatives will be more tightly regulated -- details TBD. Hedge funds will have to register themselves -- details TBD.