One of the biggest problems is that the big banks are regulated in a manner that, paradoxically, often works to their benefit and against ours. The S.E.C. watches over them but so do a host of other regulators. Every large institution can choose from among the Fed, the F.D.I.C., the Comptroller of the Currency and 50 state banking regulators, all of which compete with one another in turf battles. They also have countless agencies in other countries overseeing them. With so many different regulatory bodies, some things slip through the cracks. (A.I.G., for example, had around 400 different regulators throughout the world and conducted its sketchy financial activity in places where it did slip through.) Remember that the worst excesses of the housing bubble — especially the creation and distribution of those toxic assets — occurred within the highly regulated big banks, not the lightly overseen hedge funds.

When the banking rules are rewritten — as they are every few decades, usually after a crash — the banks also get the chance to play a big role in drafting them. Last year, Congress set broad new guidelines and tasked each regulator with writing specific rules. It was a nominally democratic process — all Americans are invited to express their views about banking regulation — but the main participants are the lawyers and lobbyists for the largest financial institutions. In one example, the S.E.C. held 34 meetings with groups proposing changes to the way the important Volcker Rule, which restricts banks from certain risky investments, is implemented. So far, almost all of these get-togethers have been with big banks and their representatives. Only one has been with a consumer-advocacy group.

The reality is that smaller banks or clever entrepreneurs who want to sell useful products to the general public simply cannot pay the price of admission. They can’t get much market share, because they don’t have the influence; and even more practically, they can’t afford the extraordinary number of lawyers and the lobbyists either. And being too big to fail generally makes the largest institutions fairly impervious to competition. There are nearly 8,000 banks in the United States, but the top 20 control more than 90 percent of the market. The top three alone control 44 percent. This is terrible for customers, who would be better served if banks competed entirely on the basis of serving us better.

Some economists say banking in the United States is a full-on oligopoly, while others say, well, it’s only oligopolesque. Regardless, we clearly need smarter, stronger regulation. But we also need banking upstarts — the Googles of finance — capable of competing with the big banks. Unfortunately, many ambitious newcomers mostly see opportunities in high-risk, high-loss products like FAZ and not in sensible things that the rest of us might want.