The message from the Bush administration was clear: The PCA "ceased to be applied to the big boys," says Camden Fine, president of the Independent Community Bankers of America. With his square jaw and plainspokenness, Fine calls to mind Jimmy Stewart in It's a Wonderful Life. Like Stewart's George Bailey, Fine is a small-town banker, though now he is the sole lobbyist for about 5,000 member banks around the United States. For more than 20 years, he ran the Mainstreet Bank on Main Street ("not Wall Street," he emphasizes) in Ashland, Missouri, a town of 2,000. He had 11 employees. Like the members of his trade group, Fine isn't fond of Wall Street, or the "too-big-to-fail" banks—the "systemically important" megabanks that the taxpayers bailed out.

"The community banks didn't cause this [crisis]," he points out. "This was Wall Street, the mortgage banks, and near-banks," by which he means the herd of largely unregulated non-depository institutions that extend credit. "Much of the regulated industry didn't have anything to do with this."

Fine says he can live with the PCA law and even endorses it, but he detests the fact that it was no longer being used for the megabanks. It makes him smolder. "Greenspan—banks couldn't get too big for him," Fine says ruefully. He recalls a 2004 battle in which the Fed wanted to remove all capital-reserve requirements from the big banks. Fortunately, the FDIC won that scrum. Otherwise, the megabanks' behavior could have been even riskier and more devastating than what occurred.

Chris Whetzel

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Author James Lieber is a lawyer whose books on business and politics include Friendly Takeover (Penguin) and Rats in the Grain (Basic Books). His previous story on the Wall Street meltdown, "What Cooked the World's Economy?," appeared in the Voice this past January.

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It was bad enough that, during that run-up to the crash, bank examiners who wanted to scrutinize the giants were intimidated. One told Fine that a bank's CEO had "a direct line into Washington, and it could destroy the examiner's career." In another incident that, Fine says, "outraged" him, an examiner who tried to sanction Wells Fargo had his decision reversed after the CEO visited the Office of the Comptroller of the Currency; the examiner was then transferred out of the bank's district.

Eventually, it became clear that "nothing was happening to the big banks, and everyone knew they were sliding south," says Fine. When four majors—Wachovia, National City, Bank of America, and Citigroup—became critically undercapitalized, Fine went to FDIC Chairwoman Sheila Bair to ask why they weren't being subjected to the PCA law, which could have resulted in replacing their executives or even breaking them up. Fine likes Bair, who has a populist streak of her own and whom he finds to be a candid, "hard-as-nails regulator." But he says she "basically gave a non-response": that there were complicated issues and that, perhaps, if she had a free hand, action would be taken. "She was very sympathetic," he says, but what he gathered was that there "was great resistance from the political community."

Fine isn't merely griping that the free pass given to the big banks was grossly preferential and anti-competitive. He means to underscore that the financial crisis didn't need to reach full bloom, and that we could have avoided the bailouts following the "too-big-to-fail" theory, which he detests as anathema to the free market. The big banks could have been put in conservatorship, reduced to rational size, or sold off in working pieces. The depositors, consumers, and taxpayers would have been protected, but "we would have had to wipe out the investors and shear off the management," he says. It's a plan he still favors.

Like his members, he has feared a "Citibank or Bank of America on every corner." Would the new administration tackle the big banks? Last winter, 12 hours after being sworn in as Treasury Secretary, Geithner summoned Fine to a meeting. "He asked me what was on the mind of the community bankers of America," recalls Fine. "I said, 'Do something about "too-big-to-fail." ' " Fine says he told Geithner that he was worried that the taxpayers would be on the hook again for further bailouts and that the economy would suffer. He raised the anti-competitive impact of propping up Citigroup and Bank of America. "Why are they treated differently from us?" Fine recalls asking.

Fine says Geithner's response was, in effect: "I understand where you're coming from, and it's something the Treasury should address." Then, says Fine, "I asked him point-blank if these firms should be bailed out. He looked me in the eye and said, 'No, I don't.' " The Treasury Secretary has recently hinted to Congress about ultimately getting rid of the "too-big-to-fail" concept, but his suggested measures "don't go nearly far enough," says Fine.

Recently, Paul Volcker, the former Fed head and current Obama adviser, indicated that the White House remains committed to the concept of "too-big-to-fail," meaning that the megabanks will continue to have a safety net and may ask for more bailouts. Presently, 19 financial institutions are on the protected list. Their business model hasn't changed materially since the crisis. They're still bloated and addicted to gambling. They could have benefited from prompt correction, but were spared.

Washington may very well foist one unified regulator on the industry, a consolidation that, at first glance, could seem like a good idea. The Big Four banks—Citi, BofA, Wells Fargo, and JP Morgan Chase—now control about 53 percent of all bank assets; the biggest 20 banks control 80 percent. There's no denying the appeal of a Transformers-type battle between a heroic Autobot regulator and the financial world's Decepticons. But that's make-believe.

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