What made this recession a "great recession" isn't only its depth and duration. Most importantly, it has forced changes in the role of government in the economy, in rules for finance and banking. In addition, and just as far-reaching, it has changed American attitudes toward spending and thrift, retirement and homeownership, as well as finance and government.
Public attitudes toward the super-banks may have changed the most. "Bailout" has become a nasty word describing the incestuous relationship between the banks and the U.S. Treasury. It is a scandal that certain bankers had a private window at the Treasury for their financial convenience when money was needed to bail them out of their gambling and mistakes. The unfairness of the government subsidizing the errors of a particular industry is obvious but it is compounded by the subsidizing of only a part of that industry, the super-banks.
Don't think that this favoritism is due to family connections or college chums or drinking buddies, although there are favorites everywhere, even in Hell. Surprise: there was also the profit motive. Banks deemed by the government as too big to fail can borrow money for normal operations at lower rates of interest. The lender knows that this borrower is virtually guaranteed by Uncle Sam. The hazard, always a factor, is greatly diminished because the US Treasury is just over the horizon to bailout the deal. As a consequence, business practices are distorted, extra risks are taken and super-banks profits are dramatically increased. They can afford more political contributions and lobbyists. The banks can use the extra profits to acquire other banks making them even more essential to the national economy.
The big banks that dominate the economy do not lack defenders in high places, defenders whose influence offsets the qualms of the average citizen. Heavyweights such as Treasury Secretary Timothy Geithner, presidential advisor Lawrence Summers, Robert Rubin, former Treasury Secretary and chief executive at Goldman Sachs and Citibank, would prefer strengthening regulation of banks rather than breaking them up by congressional law. Regulators can be pressured in a variety of ways; by the White House, by Members of Congress, by the prospect of future jobs, by the intricacies of the regulations, etc.
Finally, if the super-banks are divided so that they are not too big to fail, if a version of the New Deal Glass-Steagall Act of 1930’s was reenacted, separating commercial banks from investment banks, the question would remain whether that would be enough to prevent bank growth in unforeseen ways to the level that would command the subsidy of "too big to fail". We need to monitor these guys - in the public interest - to protect fair competition and to guard our national treasury.