WASHINGTON — An obscure provision in the regulatory reform bill adopted by the House has become a flash point in the fight over whether the legislation should spell out rules for regulators or give them wide flexibility.

The provision, authored by Rep. Jackie Speier, would limit a systemically important firm's debt to 15 times its equity. The California Democrat argued that a simple standard is necessary because regulators have failed to adequately use their authority to curb risk-taking by financial firms.

"If we are going to leave it to the regulators like we left it to the regulators over the last 15 years, we're not going to protect the American consumer, and 'too big to fail' is an issue that we will [still] be dealing with," she said in an interview Tuesday.

A growing number of academics are backing her effort, pressing the Senate to add the provision to its legislation or at least preserve it when differences are worked out between the House and Senate bills.

"This crisis was at root a crisis of big and highly leveraged institutions," said David Moss, the John G. McLean Professor at Harvard Business School who worked with Speier on the provision. "We need to be particularly attentive to their leverage, to their risk-taking."

But critics, including the banking industry, contend that limits set in legislation are arbitrary and may backfire.

"Having Congress specify the limit is not a good idea; that should be left up to the regulators," said George Kaufman, finance professor at Loyola University in Chicago. "True, regulators screwed up the last time, but Congress has no expertise in setting the appropriate leverage magnitude."

Although the provision was approved by the House in December, it has only recently begun to attract attention, particularly among several financial services blogs.

The idea came from Moss, who helped convince Speier that it was the best way to prevent systemically important institutions from becoming overly risky.

"If you go back and do the postmortem on the financial meltdown, one of the key elements of the disaster was that so many of these financial institutions were overleveraged," Speier said. "If you talk to academics, that's the one issue that they say has to be reined in. Much of what we are doing in these financial reform bills is kicking the can down the road. In some respects, it's window dressing disguised as financial reform. Unless we are willing to put some teeth in these reform measures … we are going to guarantee more of the same."

Speier noted that the Securities and Exchange Commission had a 12-to-1 leverage cap in place until 2003.

"The financial services industry came in whining about it, and literally in a basement office where the meeting was taking place, they lifted the cap, and look what happened," she said.

Moss has since argued that the Senate should go even further, advocating a 10-to-1 cap in a February blog post. His call has since been taken up by Mike Konczal, a fellow at the Roosevelt Institute, and Paul Krugman, an economics professor at Princeton and op-ed columnist for The New York Times.

Krugman said that regulators cannot be trusted to implement vague requirements for stricter leverage requirements — Congress has to act for them.

"What the legislation needs are explicit rules, rules that would force action even by regulators who don't especially want to do their jobs," Krugman wrote in his Monday column. "There should, for example, be a preset maximum level of allowable leverage — the financial reform that has already passed the House sets this at 15 to 1, and the Senate should follow suit."

Support is popping up in unexpected places.

Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, said he hopes the Senate will consider adding the provision to its bill. In an interview, Hoenig called a 15-to-1 ratio "very generous," and suggested it could be even tighter.

"It's like a building. … You get a leverage ratio of 30 to 1, you are just asking for the building to come down on top of you, and that's what we got with Bear Stearns," Hoenig said. "It's a very simple fact. The more leverage you have, the more fragile, the less stable the pillar. … High leverage ratios are an invitation to greater problems; it's been proven time and time again."

But the provision faces an uphill battle in the Senate. Banking Committee Chairman Chris Dodd's bill would let a proposed interagency council set new leverage restrictions.

An aide said the Connecticut Democrat does not believe Congress is good at setting such requirements.

"We tell the regulators to come up with stronger caps, but to use their expertise in making sure it is done right," said Kirstin Brost, a spokeswoman for Dodd.

What remains unclear is whether the House will fight for the provision if a conference session is called to resolve differences with the Senate regulatory reform bill. (The Senate has not yet approved its bill, but is expected to take it up soon after it returns from its Easter break next week.)

The Obama administration — as evidenced by many statements made by Treasury Secretary Tim Geithner — clearly would prefer regulatory flexibility to hard-wired limits.

"We do not believe that codifying a specific numerical leverage requirement in statute would be appropriate," Geithner said in a January letter to lawmakers. "Placing fixed, numerical capital requirements in statute will produce an ossified safety and soundness framework that is unable to evolve to keep pace with change and to prevent regulatory arbitrage."

Other observers also view hard limits as a mistake.

Mark Flannery, finance professor at the University of Florida and a resident scholar at the New York Fed, said unexpected economic changes could make a 15-to-1 debt-to-equity ratio appear "too high, or too low" over time.

Wayne Abernathy, the executive director for financial institutions policy at the American Bankers Association, agreed, saying the provision is just one problem the trade group has with regulatory reform legislation.

"It's symptomatic of some concerns we have in both of the bills — trying to put too much into the law that is better left to the discretion of the regulators," Abernathy said. "I don't know what's magical about 15 to 1 — that may be too high, or too low. It could vary depending on the nature of your business or the current state of the economy."

Some question how effective a 15-to-1 leverage ratio would have been in the lead-up to the crisis. Though investment banks like Bear Stearns were well over that cap, most commercial banks are not as highly leveraged because of increased capital constraints.