Ben Bernanke in peril and the Volcker crackdown on proprietary trading by banks show two truths of the current dispensation: there is no effective hedge against politics and the reflation trade rests on fragile foundations.

Neither of these realities is particularly good for financial markets and neither is going away any time soon.

Both, too, are utterly related not just to each other, but to the Senate election in Massachusetts which installed a Republican into what had been a Kennedy seat, in the process terrifying Democrats who fear they will be sunk by association with a set of policies perceived to be favoring Wall Street.

In the aftermath, President Obama unveiled a policy authored by former Fed chief Paul Volcker, which is intended to make financial firms get out of the business of using government insurance to underwrite speculative bets; well, er, not all speculative bets, but the bad kind.

At the same time the confirmation of Bernanke is under threat, and he and the institution he works for had to endure the humiliation of seeing Senator Harry Reid issue a statement endorsing him but implying that he'd extracted some sort of undertaking from the central banker to "redouble" his efforts to help those struggling in the recovery.

Whether all of this is good or bad, or even if it has much of an impact, the fact is that both are the result of a financially struggling electorate which is going to strive to control things that they've previously been convinced to more or less let alone.

That's quite a change from a few years ago, when most of us sat around stroking our chins and praising Alan Greenspan, banks and market forces as if they were one and the same. Everyone still agrees that you need banks, a market and a Federal Reserve Chairman, but there is a lot less agreement about how much freedom the three should be given.

This may be just a few politicians getting the vapors, and soon everyone may ignore finance and economics and get back to the Super Bowl and dancing competitions on television, but there is a real possibility that this popular upsurge has legs. Markets famously hate uncertainty, but this is worse: this is uncertainty mixed with hostility.

This does not have to play out one particular way, and this in some ways is the problem for investors. That stocks have been going their merry way higher in recent months while this issue lurked in the background is astounding. There is an extremely high level of uncertainly over how the world will work in coming years.

David Fuller's view It is self-evident that regulation is never popular with those who are about to be regulated, or in the case of US banks, re-regulated. Which of us would choose to have our lives more regulated by government than they already are, especially if we are not causing any harm to others?

Unfortunately, in the long sad history of bad ideas, unregulated financial institutions have a history of creating havoc, sooner or later. History also shows us that banking regulation can contribute to economic stability for lengthy periods.

The new normal is that banking regulation is back, and about time in my view.

Here is a related article: Taxing Wall Street Down to Size, by David Stockman for The New York Times. (See also Eoin's comments below.)