Some Washington policy makers appear to be considering creating a single banking regulator, though a dual-track structure appears to be the idea with the most momentum among top officials right now.

According to a staff memo circulating on Capitol Hill, a new financial-services regulatory plan the Administration is set to propose included the idea that the Federal Reserve would be the new systemic risk regulator, and that there would be a new single government agency to conduct “prudential regulation” and supervise banks, insurers and other financial-services firms. 

Indeed, The Wall Street Journal reported on Wednesday evening that “The new agency is expected to be a major plank in a proposal that Treasury Secretary Timothy Geithner and White House officials send Capitol Hill in a few weeks with the goal of overhauling supervision of financial market.” 

One financial industry lobbyist noted that a White House spokesperson did not deny reports that the idea was under consideration by the Administration. 

However, key political players have been talking up a structure that would likely create a single regulator for systemically significant institutions, but would leave most powers of some of the current agencies intact.

 Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, said on CNBC Thursday morning that “The suggestion that we’re going to get to a unilateral bank regulator, something equivalent to the Financial Services Authority [in the U.K.], is simply wrong.” 

“We are going to be talking about two things.  One, we are worried about the health of banks.  Two, we are worried about systemic risk.  That's why my own preference is for a dual-track regulation,” Frank said. “One will be to continue to have the existing prudential regulators at the SEC, at the FDIC, at the OCC -- the bank and securities regulators, the CFTC, which has a major role.  And at the same time, create some power, somewhere, probably in a combination of federal regulators to deal with systemic risk.” 

Indeed, a new single regulator would have to overcome a number of obstacles, including opposition from other agencies that already oversee pieces of the financial-services sector. 

For instance, Securities and Exchange Commission Chairman Mary Schapiro said in a speech earlier this month that “Given the various components of effective financial regulation, I have long been concerned about excessive concentration of power -- which really means excessive concentration of point of view -- in a single regulator.” 

Schapiro noted in that speech that she would likely support a hybrid approach suggested by Federal Deposit Insurance Corp. Chairman Sheila Bair that would involve “a single regulator for systemically significant firms coupled with a systemic risk council to provide macro-prudential oversight of risk” 

Some critics have called for merging the Office of Thrift Supervision with the Office of the Comptroller of the Currency -- both are regulators within the Treasury Department -- in part because of last year’s failures of Washington Mutual and IndyMac, which were overseen by the OTS and which cost the government billions of dollars to bail out.

“There was no megabank failure, whereas we had the mega-thrift failures,” said Jaret Seiberg, a financial analyst with Concept Capital. "In some ways the OTS is being made the scapegoat in the broader battle because some of the other institutions that might have collapsed, the government didn't allow that to happen….[But] I think that the thrift charter survives this whole process and you will have a specialized regulator to look after the thrift charter. Whether that becomes a subpart of the Comptroller of the Currency or remains independent -- in some ways it doesn't matter. You're going to keep the charter and you're going to keep a specialized regulator.”

Seiberg noted that the large thrifts were allowed to fail, whereas the endangered large banks were considered "too big to fail" and were bailed out, so the OTS got the brunt of the bad headlines, not necessarily for being any worse or taking any more risks than other financial regulators.