So remember that proposed legislation sent by Treasury Secretary Tim Geithner to Congress on Aug. 11 to toughen up regulation of opaque financial instruments called derivatives? Assistant Secretary Michael Barr said the proposed bill went to the "heart of the problems" afflicting the financial sector. Well, one important regulator thinks Treasury's proposed fix falls short.

In an Aug. 17 letter to key lawmakers that was obtained by McClatchy Newspapers, Gary Gensler, chairman of the Commodity Futures Trading Commission, takes Treasury to task. He calls the proposal "a very important step" but suggests several improvements.

"I believe the law must cover the entire marketplace without exception," Gensler wrote, detailing a number of exceptions in the Treasury bill that should be done away with.

One of them was highlighted earlier by McClatchy, a provision that allowed many smaller companies to escape having to settle their complex transactions in transparent fashion at a clearinghouse. Gensler proposes instead that they form client relationships to do so, shutting the door on a potentially huge loophole.

In case you are keeping score at home, Gensler and Geithner, as assistant Treasury secretaries, helped push through deregulation legislation at the end of the Clinton administration that led to many of the abuses that brought today's financial crisis. Now they are both angling to fix the mess from different perches, and their former boss Larry Summers is Barack Obama's chief economic adviser. Only Geithner has not worked on Wall Street. That might explain why Gensler saw dangerous loopholes in the exceptions suggested by the Obama administration.