Gar Alperovitz — Wall Street Is Too Big to Regulate

It’s also true that not all Chicago School economists (not to mention their descendants) agreed with Simons, especially on the controversial issue of nationalization. But the logic of his argument remains: With high-paid lobbyists contesting every proposed regulation, it is increasingly clear that big banks can never be effectively controlled as private businesses. If an enterprise (or five of them) is so large and so concentrated that competition and regulation are impossible, the most market-friendly step is to nationalize its functions.

What about breaking up the banks, as many on the left favor? Recent history confirms another Chicago School judgment: while a breakup might work in the short term, the most likely course is what happened with Standard Oil and AT&T, which were broken up, only to essentially recombine a few decades later.

The New York Times | Opinion
Wall Street Is Too Big to Regulate
by Gar Alperovitz
(h/t Kevin Fathi via email)

Of course, it would probably take another financial meltdown to make banking nationalization politically tenable. But given how the sector has behaved since the last crisis, a repetition seems inevitable, and sooner rather than later.

This is the way that the scenario unfolds in my view at this point.