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On the same day that J.P. Morgan paid more than $150 million to settle federal charges that it had lied to investors in 2007 about a mind-bogglingly complex mortgage product, a top U.S. bank regulator said he was “skeptical” of recent attempts to regulate the financial system.

“We have to be able to figure out how far is too far, and when to stop,” said Acting Comptroller of the Currency John Walsh during a speech in London [pdf]. “I worry that the high capital requirements, liquidity requirements, and activity restrictions we are pursuing are attempting to banish all risk from the banking system.”

J.P. Morgan CEO Jamie Dimon recently said that capital requirements— limits on the amount of leverage a bank can take on– was a “reason” the economy was failing. The Office of the Comptroller of the Currency (OCC), which Walsh runs, oversees 1,400 banks and generally takes a lighter approach to regulation.

Walsh also criticized the section in the 2010 financial reform bill known as “Volcker Rule,” which banned banks from using house money to make certain kinds of risky and complex trades.

“If we draw the circle too narrowly around what we call ‘banking,’ we will unnecessarily restrict legitimate banking activity and raise its cost,” he said.

Senator Carl Levin (D-Michigan), who recently published a scathing 550-page report on Goldman Sachs’ machinations in the lead-up to the financial crisis, told the Financial Times that the Obama Administration needed to get rid of Walsh.

“It is past time for the president to nominate new leadership at the OCC to protect American families and businesses from the excesses of Wall Street.”

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