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It seems inconceivable that more than two years after events began that nearly brought the financial system’s collapse — in the process destroying one of Seattle’s largest headquarters in the biggest bank failure ever — that reform remains stymied. But here we are.

Not only that, but the core practices that caused the crash, such as unregulated derivatives, exorbitant executive bonuses and the shadow banking industry, continue much as they did before the Great Panic. The system remains at risk of another, perhaps even worse, disintegration.

The practices continue despite the future living standards of Americans that were pawned by two presidents and the Federal Reserve to rescue these institutions.

Executives, notably Jamie Dimon of JPMorgan Chase who got a sweet deal on WaMu, are unapologetic in their resistance to new regulation.

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Christopher Dodd, D-Conn., chairman of the Senate banking committee, finally has introduced legislation that might bring some improvement, but it’s a watery gruel. And it may never make it into law.

The reasons behind this bizarre paralysis are many. The bank bailout did “work,” in that it prevented a depression-causing disaster. The Dow has rebounded from around 6,500 to nearly 11,000. The health-care debate, increasing partisan vitriol, the complexity of Wall Street and the short American attention span — all have played a role.

Yet the biggest reason is the bankers themselves. As economists Simon Johnson and James Kwak write in their new book, “13 Bankers: The Wall Street Takeover and the Next Financial Meltdown”: “The Wall Street banks are the new American oligarchy.”

Over three decades, the financial sector has undergone a radical transformation from a rather dull, straight-laced business into the largest sector in the U.S. economy. And the most politically potent.

“Financial sector money poured into the campaign war chests of congressional representatives,” Johnson and Kwak write.

“Investment bankers and their allies assumed top positions in the White House and the Treasury Department. Most important, as banking became more complicated, more prestigious, and more lucrative, the ideology of Wall Street — that unfettered innovation and unregulated financial markets were good for America and the world — became the consensus position in Washington on both sides of the political aisle.”

No wonder, then, that regulations were slowly eased and eliminated, including the Depression-era Glass-Steagall Act, which separated risk-taking investment banking from taxpayer-insured commercial banking.

Dangerous new products such as derivatives and credit-default swaps became commonplace. The shadow banking industry, such as hedge funds, became powerful and added risk, but was barely regulated.

Regulators were encouraged to keep their hands off practices such as the liar-loan subprime mortgages sold by WaMu, then bundled on Wall Street and sold to gullible investors.

The Dodd proposal is a moving target. But it would authorize some regulation of some derivatives (although probably not the most dangerous). It would include some kind of consumer-protection agency. A Financial Stability Oversight Council, including the Treasury secretary and the chairman of the Federal Reserve, would be established. Among its tasks would be to oversee the winding down of any giant institution that got into trouble.

The big bankers are objecting even to these plans. And the financial industry spent more than $334 million last year lobbying Congress, more by some estimates.

A more realistic objection comes from Dodd’s colleague on the banking committee, ranking Republican Sen. Richard Shelby of Alabama. According to Reuters, Shelby told Treasury Secretary Timothy Geithner that the plan would allow a “backdoor way” for the Fed to risk taxpayer dollars to prop up failing firms.

Because I’m not paid by the bank lobby, my objections go further. The Dodd bill wouldn’t provide enough regulation or transparency of derivatives and the shadow banking system. Many derivatives have no real value at all and their trading is a casino, with the losing hand held by the wider economy. Not for nothing did Warren Buffett call them “financial weapons of mass destruction.”

Nor does Dodd make a move to dismantle the too-big-to-fail banks. Industry consolidation and gigantic institutions are at the heart of the crisis, as well as the impediment to healthier policies.

An orderly breakup of these giants, which were after all created by a series of acquisitions, would not only remove the industry’s gun to Washington’s head, but could also return numerous regional bank headquarters to cities that need them. (Welcome home, Seafirst. See ya, Bank of America.) If the bankers are so brilliant, they can handle such a spinoff operation and no doubt profit from it.

Finally, it fails to enact a 21st-century Glass-Steagall Act, with a firm separation between the Wall Street casino and federally insured banks, as well as cleaning out the dangerous interconnectedness among institutions.

The policymakers and citizens who lived through the Depression wanted banking dull, and they also wanted Wall Street to be focused on raising capital for productive businesses and jobs. They, like Theodore Roosevelt a century ago, also expected regulators to be watchdogs, not lap dogs.

What a quaint notion.

You may reach Jon Talton at jtalton@seattletimes.com