Kansas City Federal Reserve President Thomas Hoenig takes on the too big to fail banks a thousand miles to the East in this New York Times op-ed today.

The world has experienced a severe financial crisis and economic recession. The Treasury and the Federal Reserve took actions that saved businesses and jobs and may very well have saved the economy itself from ruin. Still, the public seems ungrateful, expressing anger at these institutions that saved the day. Why?

Americans are angry in part because they sense that the government was as much a cause of the crisis as its cure. They realize that more must be done to address a threat that remains increasingly a part of our economy: financial institutions that are “too big to fail.”
…
Last summer, Congress passed a law to reform our financial system. It offers the promise that in the future there will be no taxpayer-financed bailouts of investors or creditors. However, after this round of bailouts, the five largest financial institutions are 20 percent larger than they were before the crisis. They control $8.6 trillion in financial assets — the equivalent of nearly 60 percent of gross domestic product. Like it or not, these firms remain too big to fail.

How is it possible that post-crisis legislation leaves large financial institutions still in control of our country’s economic destiny? One answer is that they have even greater political influence than they had before the crisis. During the past decade, the four largest financial firms spent tens of millions of dollars on lobbying. A member of Congress from the Midwest confirmed for me that any candidate who runs for national office must go to New York City, home of the big banks, to raise money.

The solution, of course, is for Congress to break up the “too big to fail” banks, something that still seems quite unlikely even after the events of the last few years and the changing political climate in Washington. Unfortunately, it will probably take another crisis even worse than the last one for real reform to come.