Washington threatens to make reforming the financial system more complicated than it needs to be. The Treasury Department's white paper for reform is 89 pages long. The bills are a lot longer. True, there is much to tackle -- derivatives, executive pay, consolidation of regulators. But pols ought to start by focusing on two key factors -- capital ratios and transparency. If they do, much good will follow without needless small print.

Many causes went into last year's meltdown, but what made it deadly and cascading were numerous examples of excess leverage -- far too much borrowed money and far too little solid capital in the vaults. Banks are typically capitalized at a 10 to 1 ratio. Lehman Brothers was something north of 30 to 1. At 30-to-1 ratios it takes only a 4 percent loss on your invested position to wipe out the firm. The solution is simple. Don't allow 30 to 1. And really really don't allow 30 to 1 when the maturity on the debt can be measured in months or weeks, not years.

Second, regulators need to have quick and clear views of what giant financial firms are doing. This means greater disclosure by hedge funds and other private equity, to the extent that they are using significant borrowed money to invest. I would use debt -- leverage -- as a trigger for private-equity regulation both because debt often signals risk and because this approach would leave venture capital alone.

Venture capital is the investment that breeds innovation and creates economic engines such as Google or Microsoft. Venture capital employs little debt. Venture capital must not be punished with new red tape and expenses for the sins of AIG and Lehman. Under Treasury's white paper, it looks like it would be.