Robert Johnson argues that the main obstacles to simplifying the financial system are political:
Eighteen months into the greatest economic crisis since the Great Depression, the United States government has not enacted significant financial reform. Nor is the legislation now pending in Congress likely to deliver the profound change we need.
When the U.S. Treasury secretary tells us that the bailouts of large complex financial institutions, however distasteful, were necessary to save the economy, he is telling us two things — one spoken and one unspoken. He explicitly states the need to give these behemoths taxpayer funds because if large institutions are allowed to fail, we will get dragged down with them into a depression. What’s not stated clearly is that these spillovers from finance to the larger economy are also grounds for very substantial financial regulation prior to the onset of a crisis — the proverbial ounce of prevention.