The team, led by Thomas McCool, the GAO's managing director for financial markets and community investment, reviewed the state of U.S. financial services regulation for Sen. Richard Shelby, R-Ala., the chairman of the Senate Banking, Housing and Urban Affairs Committee.

Current U.S. state and federal regulatory systems have not failed, but they are fragmented, and they work better on some levels than on others, the McCool team concludes in a summary of its findings.

Moreover, "from time to time, regulators engage in jurisdictional disputes that can distract them from focusing on their primary missions," the GAO researchers wrote.

The GAO report deals mostly with bank and securities regulation, but the researchers note that the National Association of Insurance Commissioners, Kansas City, Mo., faces attacks both from critics who say it has too little power to harmonize state insurance regulations and critics who say it is too powerful and operates as a quasigovernmental body.

Creating a single insurance regulator, or a single regulator for all financial services sectors, could solve some problems, but it also could expose the country to new risks, such as the risk that regulators might lose track of small companies, the researchers write.

Creating a special regulator for big, multinational financial services companies also could cause problems, but it might help promote financial stability and give the United States more clout in international forums, the GAO researchers write.

The GAO has posted the financial services regulation report on the Web at http://www.gao.gov/new.items/d0561.pdf