How do you wrest control of the banking industry away from the vested elites who got us in this mess? Former IMF chief economist Simon Johnson makes the fascinating point that breaking the back of the elites is a critical stage in crisis resolution in developing and post-communist countries — a stage we have yet to go through in confronting our own crisis:

The elites who run the US banking industry have had a great run of economic good fortune. They used this wealth to further strengthen their political power, both through donations to politicians of almost all stripes and more broadly through taking positions of formal and informal influence throughout the executive and legislative branches.

Our unsustainable debt-fueled boom, in other words, produced both the conditions for a major global financial disaster, and a political strengthening of the people who benefited most from the risk-taking and associated compensation packages that made this disaster possible. Ending the financial crisis is relatively straightforward – a forced recapitalization and change of ownership/management in the banking system – although this will not immediately lead to an economic recovery … But seen in deeper political terms, decisive action to restructure large banks is almost impossible. Such action would require overcoming perhaps the single strongest interest group in the United States today.

How can you do it? The answer must be by splitting this powerful interest group into competing factions, and taking them on one by one. Can this be done? Definitely, yes. In particular, bank recapitalization – if implemented right – can use private equity interests against the powerful large bank insiders. Then you need to force the new private equity owners of banks to break them up so they are no longer too big to fail.