So argues Henry Kaufman in FT:

The Federal Reserve has been hobbled by at least two major shortcomings that were primarily responsible for the current and several previous credit crises. Its failure to spot the importance of changing financial markets and its commitment to laisser faire economics were big mistakes and justify a fundamental overhaul of the Fed.

Kaufman actually comes close to my own view near the end of his piece:

Ironically, the problem was made worse by the fact that the Fed was inconsistently libertarian. The central bank stuck to its hands-off approach during monetary expansion but abandoned it when constraint was necessary. And that, in turn, projected an unpredictable and inconsistent set of rules of the game.

We should, therefore, fundamentally re-examine the role of the Fed and the supervision of our financial institutions. Are the current arrangements within the Fed structure adequate – from its regional representation to its compensation for chairman and governors to its terms of office for governors? How can the Fed’s decision-making process be improved? If we were to create a new central bank from the ground up, how would it differ? At a minimum, the Fed’s sensitivity to financial excesses must be improved.

That's right Mr. Kaufman, the Fed was entrusted to do all the things you discuss in your article, and the Fed screwed up horribly. But rather than tinkering with it and getting it j-u-u-u-u-st right, let's be consistently libertarian. No central bank with a monopoly on money production, no legal tender laws, no special regulations on banking. And if a bank gets overleveraged and blows up, Go Straight to Bankruptcy Court. Do not pass Paulson, do not collect $700 billion.