Bank Reform Looks Too Big to Pass: Today's Outrage

NEW YORK (TheStreet) -- Financial industry heavyweights like AIG (AIG Quote), Bank of America (BAC Quote) and Citigroup (C Quote) are back in the Congressional crosshairs.

Rep. Barney Frank (D., Mass.), chairman of the House Financial Services Committee, is planning to introduce a bill as early as this week that would give the government new emergency powers to take control of banks and financial services companies, according to The New York Times.

The legislation would let the government oust management, change the terms of loans and "wipe out shareholders," the newspaper reported, citing a senior official in the Obama administration.

The idea seems to be that if a bank is too big to fail, then it should be as easy as possible for the government to intervene in troubled times.

This kind of lawmaking only works as a knee-jerk reaction to a crisis, when Republicans and Democrats are equally panicked and looking for a big win for the people to shore up their political ambitions. That's how we got the Sarbanes-Oxley Act in 2002, after the collapse of Enron and other accounting scandals that stoked a bipartisan rush to regulate.

This time around, things are returning to "normal" so quickly that the urgency already seems lost.

For all the talk about reining in the megabanks, recent earnings reports from JPMorgan(JPM Quote), Wells Fargo (WFC Quote) and other bailout recipients show that they are bigger than ever, in part due to the merger mania that the government encouraged in the early days of the financial meltdown.

Ordinarily, big profits at big banks might give regulatory reformists some amunition, but at this point in time the earnings seem more like a welcome sign that the financial crisis may be over.

The desire for normalcy and a return to the good old days may now be a more powerful political force than the desire for change.

When you see the likes of Goldman Sachs (GS Quote) setting aside billions of dollars for bonuses, you know that that the bankers aren't too worried about "reform."

This legislation is too much, too late. In fact, I'd say it's too big to pass.

--Written by Glenn Hall in New York.