The U.S. banking system will crash again. Which will mean yet another Great Recession, and a sequel to the perilous credit freeze afflicting the entire integrated global financial system, including the part headquartered at Bay and King Streets.

And why is that? A mystery, you would think, given the 8 million U.S. and 400,000 Canadian jobs lost in an avoidable recession triggered by CEOs of the world’s biggest banks all drunk on reckless personal wealth accumulation.

Historic, sweeping reforms usually follow such catastrophes. But not this time. Every meaningful reform discussed in Washington following the epic 2008-09 failure of capitalism was scrapped or diluted under pressure from America’s banking lobby.

Having just tipped the global economy into the worst economic downturn since the Great Depression, you would expect America’s bank lobbyists to command no more credibility than Charles Manson applying for work at a daycare centre.

But Wall Street still had money — thanks in part to a $700 billion taxpayer-funded bailout of Bank of America Corp., Citigroup Inc. and the like. Legislators obsess over job security. Getting re-elected costs tons of money. And here’s a friendly bank lobbyist offering a donation if certain clauses of a proposed banking reform are quietly dropped.

Franklin Roosevelt’s reaction to the Crash of ‘29 and what followed was legislation that divorced speculative investment banking from traditional commercial banking.

But the conventional wisdom of the past 30 years is that the excesses of the free market are self-correcting. Which is horse dung. But by 1999, FDR’s legislation seemed obsolete and was revoked.

What soon followed was an unprecedented U.S. housing bubble financed by subprime, or junk, mortgages. Wall Street bundled these and dispatched them to banks, pension funds and university endowments worldwide for handsome upfront fees. It also polluted the system with collateralized debt obligations (CDOs), arcane derivatives, and other high-risk crapshoots.

As we see from the outlandish bonuses Wall Street continues to pay itself while foreclosing on about four million American homeowners, the money pit ethics haven’t changed a whit.

Arguably worse, the biggest banks are bigger still after the crisis, the weaker ones having been ushered by government into the embrace of larger ones. And so, today America’s half-dozen or so “megabanks” account for a worrisome 52 per cent of total U.S. banking assets.

And that makes each of them “too big to fail.” Knowing they will be rescued by the taxpayers rather than be allowed to fail and crash the whole system, CEOs of America’s biggest banks continue using their institutions as playthings for extracting stupendous bonuses if their risky bets come up sevens.

The sense of entitlement to personal wealth-enrichment has always run deep on Wall Street. It eclipses patriotism and regard for clients. Last month’s Levin congressional probe surfaced startling new evidence of that, confirming suspicions that mighty Goldman Sachs Group Inc. had been in the practice of betting against its own clients. If Goldman’s sense of fair play strikes you as self-serving, rest assured that GS is “doing God’s work,” as its CEO has said.

The merger mania that created the U.S. megabanks has weakened them. As with any diversified conglomerate, they now have countless ways of getting into life-threatening trouble. As they’ve just done, and will do again.

Prudence and strict regulation do not impede profitability or expansion. The average annual gain in the value of stock in Canada’s comparatively prudent Big Five banks over the past decade is 11.6 per cent. The average annual decline in the stock-market value of America’s five biggest megabanks during that time is 2.3 per cent.

Nor do fat CEO pay packages reward investors. J.P. Morgan Chase Jamie Dimon, who has fought most successfully against effective regulatory reforms, pocketed more than $20 million in pay last year. His bank’s shares have lost 14.9 per cent of their value in the past decade.

By contrast, Robert Wilmers, longtime CEO of Buffalo-based regional bank M&T Bank Corp., a traditional commercial bank, was paid $2 million last year. This quiet crusader for meaningful bank reform has rewarded M&T shareholders with a 12.6 per cent gain over the past 10 years.

As Wilmers noted in M&T’s 2010 CEO letter to shareholders, the pay of America’s highest-paid bank CEOs now equals 516 times average U.S. household income. That figure was 97 times in 1989.

Like Canadian banks, U.S. lenders are required to pay into a national deposit-insurance scheme. M&T’s reward for its culture of prudence was to be hit last year with a 1,984 per cent increase in Federal Deposit Insurance Corp. (FDIC) fees, to top up a pool depleted by all the recent bank failures. M&T has to pass that burden on to its clients.

And here’s the scary part — the threat that America’s banks still pose to the global economy. Of the combined $75 billion in profits recorded by America’s top megabanks last year, an alarming three-quarters came from trading activity, not traditional banking.

Trading is volatile, gyrating from immense profits to deep losses. But engaging in high-risk, high-reward trading is the only way folks like Jamie Dimon can justify their ludicrous pay.

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Add it up — the overpaid CEOs, the bailouts, the stretches like now when tapped-out banks can’t lend, the needlessly high cost of deposit insurance — and that’s a textbook description of business inefficiency. And a drag on the entire economy.

As Wilmers put it, “I am concerned about . . . a government regulatory regime which both enables what I have described as this ‘virtual casino’ to continue, notwithstanding its role in precipitating the financial crisis — and which, by not recognizing the difference between Main Street and Wall Street banks, financially burdens the ‘real economy.’ ”

Oh that, the real economy. It should hire some lobbyists.