Gary Stern, president of the Federal Reserve Bank of Minneapolis, literally wrote the book on financial institutions that are too big to fail. It shouldn’t be surprising, then, that he addressed the subject in a speech this morning at Washington University’s Weidenbaum Center.

For the biggest banks and other financial firms, he’d like to see a rules-based system that requires specific corrective actions when capital falls below a certain level. Just telling current supervisors to get tougher won’t be enough, Stern says:

The recent track record in this area does not inspire confidence. Conventional supervision and regulation, even if heightened, is unlikely to be adequate. 

In response to a question, Stern said that the Fed might logically take responsibility for overseeing systemic risk, but that he “didn’t have a conviction yet” as to which agency would get the role.

Stern also discussed Treasury Secretary Timothy Geithner’s plan to purchase banks’ troubled assets. He says it won’t be a miracle cure, but is likely to do some good:

I would guess that this will get off to a slow start. The auctions and the pricing might be more positive than you think, though, because the financing is pretty attractive.