Much of the commentary on the financial meltdown and regulatory reform has been first-rate. Many writers, including in the mainstream press, have explained in popular language how Wall Street ruined the economy and how it got richer doing so.

It’s not a pretty picture – far from the rosy concepts college students learn in introductory economics courses.

In the real world, in contrast to college textbooks, financial markets are neither free nor self-correcting. Nor do they act as an intermediary that connects savers and borrowers. Nor is their main function to channel investment dollars to the productive economy as they once did.

Financial giants – Goldman Sachs, Citigroup, JPMorgan Chase, Morgan Stanley, Wells Fargo, Bank of America – sit at the apex of our financial system. And in that position (because of their connections, insider knowledge, bottomless pockets and strategic position in the global economy, and because of weak regulation), they are able to legally and illegally rig markets to their advantage.

More and more, their profits come from speculative and non-productive activities within the sphere of finance – packaging, buying, swapping and selling various kinds of financial instruments, most of which are only incidentally and remotely connected to the real economy of goods and services. To say that the financial system has turned into a gambling casino is pretty much on the mark.

Moreover, as we have just learned, these markets – filled with hyper-inflated toxic assets, interconnected by a thousand threads, and concentrated in a few hands -can go south at breakneck speed, leaving the larger economy in shambles and slow to recover. Indeed, long-term stagnation in the aftermath of a financial shock is more likely than robust growth, as evidenced recently in Japan. There a real estate bubble burst and threw the economy into a decade-long funk in the 1990s.

In other words, unregulated financial markets have a built-in tendency to systemic meltdown – that is, the collapse of one or two major banks or investment houses can derail the whole economy. No non-financial corporation can claim that power.

So how do we change this? Some say increase oversight and capital requirements; others argue for a new up-to-date regulatory structure; still others talk about tightening control of derivatives and a tax on short-term capital movements; and finally, many insist that financial institutions should not be so big that if they fail, they bring the economy to its knees.

Each of these elements is a part of the current Senate debate over a financial reform bill. True to form, Republicans, who have been portraying themselves as anti-Wall-Street populists, want none of it. So far they have been able to prevent debate and any action on regulatory reform. Democrats, with one exception, favor reform, but most (along with the White House) are keeping their distance from the needed step of breaking up giant financial institutions into smaller units.

Nevertheless, it appears that some form of regulatory reform will pass and place some restraints on Wall Street. And that will be a good first step.

As I see it, however, no regulatory reform, even far-reaching reform, is foolproof as long as the financial system is embedded in an economic system – capitalism – that contains inherent pressures on its players to grow bigger, out-compete their rivals, pursue a risky investment strategy, bend and break the law, and, above all, maximize their year-end profits and bonuses. The pressures are both external (other competitors) and internal (capitalists are in business to make money in the first place).

Therefore, a more fundamental solution to the recent financial crisis requires taking over and democratizing the financial system, including the Federal Reserve Bank. By any objective measure, Wall Street has given up its right to manage our nation’s finances.

But there is a hitch. The American people and Congress have yet to be convinced that such action is necessary.

But worry not! In my opinion the dialectics of struggle will bring this idea into the mainstream. It is hard, for me anyway, to see how the economy can be restructured along a robust, sustainable and job-creating developmental path without turning the financial system into a public utility and resource.