Industry lobbyists generally aren’t so belligerent when talking to congressmen from the provinces, or at least they don’t show it. Volcker and Fisher should know better, but congressmen? No, we suffer—or benefit—from the soft bigotry of low expectations. Bank lobbyists explain financial practices to us patiently, speaking slowly and using small words. As bank lobbyists patiently explained finance to me, I resisted the temptation to use expressions like “Shazam!” or “Well, g-o-l-l-y!” made famous by a fictional North Carolinian. When they explained the flaws of consumer protection legislation, they began with “while this legislation is well-intended…”

When we do pass reform legislation, the law is enforced by regulatory agencies, which also tend to be staffed by mere mortals.

The Volcker Rule limits “proprietary trading” in derivatives by the biggest banks, and regulators may step in when any practice puts the solvency of a bank or the stability of the financial system at risk. Good luck with that. Some examiner is supposed to figure out whether hopelessly complex credit default swaps are impermissible “proprietary trades” or permissible “hedging” or “market-making,” and the risks credit default swap positions might create.

Ina Drew, JPMC chief investment officer, made $14 million last year. If she didn’t understand the risk in their derivatives positions, then what chance does an examiner on a government salary have?

The repo market is even less regulated. “Repo” is short for “repurchase agreement.” Repo lending is a form of “shadow banking” and it’s complicated too. There are $15 trillion in assets in shadow banking, more than the assets of traditional banking. Bear Stearns was borrowing as much $102 billion a day in the repo market to stay in business. An old-fashioned run in shadow banking ultimately brought Bear down, with repo lenders rushing to get their money out.

The biggest banks argue that if the lesser mortals who populate the institutions of democratic government don’t understand the intricacies of their business, then we just shouldn’t meddle. The laws Congress passes or the rules that regulators adopt may well have “unintended consequences.” And if Congress or regulators forbid one practice, they’ll just find another way to do the same thing. So really, regulation is just a pointless irritant.
The consequences of not meddling may be unattractive,  however.

According to Tyler Cowen, an economist and blogger, because of shadow banking and the derivatives markets “[i]t now seems that the 21st century will resemble the 19th and early 20th centuries, with periodic panics and runs on financial institutions, perhaps followed by deflationary collapse.” An economic recovery “may shove some problems into the future. But banking and finance remain a mess at their core,” Cowen said.

So how do we avoid this grim future?

We can just break the biggest banks up. A bank would almost certainly be easier to understand, both for the bank’s managers and for safety and soundness regulators, if there is less to understand. And a mistake by a smaller bank’s management or regulator may bring the bank down, but it probably won’t lead to a “deflationary collapse” of the economy.

There is little that a $2.3 trillion bank can do that ten $230 billion banks can’t do as well or better, and banks the size of JPMC are far more than ten times the problem.

Earlier this month Sen. Sherrod BrownSherrod Campbell BrownHillicon Valley: Facebook, Google struggle to block terrorist content | Cambridge Analytica declares bankruptcy in US | Company exposed phone location data | Apple starts paying back taxes to Ireland Overnight Health Care — Sponsored by PCMA — Trump hits federally funded clinics with new abortion restrictions Senate Dems call for probe into why Trump has not issued Russia sanctions MORE (D-Ohio) and I introduced the SAFE Banking Act to break up the biggest banks into banks that are small enough and simple enough to fail without bringing the financial system down. The biggest banks probably think that’s an infantile idea, and that Americans won’t support that solution to “too big to fail” banks.

Surprise, surprise, surprise.

Rep. Miller (D-N.C.) is a member of the House Financial Services Committee.