01/06/2012 08:05 pm ET Updated Mar 07, 2012

Handcuffs and Prison Sentences for Bankers Next Time

Why are there no banking statesmen is a question I've asked before , and it is the unstated question underlying a recent Financial Times editorial: "Restoring Faith in the Banking System." While the editorial focuses on the "culture within banking institutions," the real problem is leadership or, more accurately, the utter lack of enlightened leadership in finance today.

The leaders in banking and finance today are unanimous in their unrestrained zeal to fight financial reform as hard as possible while whining about being picked on and not appreciated. The just-won't-shut-up JP Morgan Chase CEO Jamie Dimon is the poster child for this ignorant and, ultimately, self-defeating, narcissistic reasoning, but he is by no means alone.

With so many worldwide still suffering from the worse economic downturn since the Great Depression of the 1930s, with un- and underemployment and foreclosures at historic highs, with poverty rising and the middle class declining, with hopelessness again ever-present at too many family tables, with dreams deferred or just dead, rich-beyond-Croesus Wall Street bankers are self-centeredly complaining about how tough they have it. It's enough to make any decent, honorable, honest, self-respecting person sick.

Yet not one has stepped up and stepped out to say that their industry contributed overwhelmingly to the financial crisis of 2008, that it cost this country and the world dearly, that most of the those costs were shifted to society and taxpayers from the financial industry and bonus-bloated bankers. Not one has said that they recognized this and that they were going to work with governments to reform finance and make it safer, stronger, and less prone to crisis, and genuinely make sure that taxpayers would never again have to bail them out from their reckless activities.

Not one malefactor has said any of this. Indeed, they all circled the wagons, loaded up on paid mercenaries -- oops, lobbyists and lawyers -- and began a massive, comprehensive strategy to defeat financial reform:

First, fight any legislation.

Second, fight every rule to implement that legislation.

Third, sue in court to stop any rule they didn't like.

Fourth, fund and elect as many anti-reform politicians as possible.

Fifth, get those politicians to do whatever they can to roll back reform, harasses financial regulators, and defund them.

Sixth, delay as much reform as possible in the hope of getting past the November 2012 elections, when they plan on a bank-friendly Senate and president to join the already anti-reform House and, together, they would deliver the final coup de grâce to financial reform. (Why did John Paulson give $1 million to a Romney-friendly super-PAC that dropped $1 million in negative ads on Newt Gingrich, you ask?)

No leader of any bank or financial institution has objected to this defeat-financial-reform-at-any-cost strategy. They all parrot the same talking points, pay the same lawyers and lobbyists, fund the same trade and front groups, and contribute to the same anti-reform politicians. And, they all blame regulation for everything bad, from the economy to unemployment to their own poor performance.

If this strategy is successful, as a similar one was in the decades before the financial catastrophe of 2008, the restraints would be off, the cops would be taken off the Wall Street beat, and bankers would be able to do as they please while stuffing their pockets full of as much cash as possible -- again. As the always dead-on New York Times columnist Gretchen Morgenson put it, "banks love the perks that come with being too big to fail. They will lobby shamelessly to hang on to their riskiest businesses and stay perilously large. No surprise, really. A heads-we-win, tails-the-taxpayers-lose model has a lot going for it, at least for executives atop these institutions."

However, sealed off from reality in their riches-bought insularity, surrounded by high-paid, like-minded sycophants, and singing "Happy days are here again," the bankers would be blindly dancing to Armageddon because, as has been proved repeatedly throughout history, unregulated and unrestrained bankers are their own worst enemy. Ultimately, this Hobbesian state of banking would be self-defeating and another financial collapse inevitable.

The backlash after the next financial calamity will make the Dodd-Frank Act look so mild that many will wonder if it was written by bankers themselves. Handcuffs and prison sentences will not likely be in short supply next time. Clawbacks of billion dollar bonuses will be the norm, as one mansion after another is put on the auction block. That's the future of bankers after their next reckless, unregulated splurge.

What about banking? The Financial Times was right to point out:

[T]hose who attack bankers often forget how essential the core activities of a financial institution -- the payment systems and deposit-taking -- are to the functioning of a modern economy. Even investment banking -- sometimes maligned as "socially useless" -- has a part to play. Many derivatives do help companies and individuals manage real business risks.

All true, but those traditional and socially useful banking activities are too often an afterthought and little more than window dressing behind which a Wall Street focused obsessively on getting the biggest bonuses hides their biggest, most irresponsible bets that literally threaten the financial system.

That's the culture that has to change, and that's going to require statesman-like leadership from within, or prison sentences from without.

Anyone interested in being a statesman should begin by reading about the Bloomberg editorial "Don't Give Up on the Sensible Ideas of the Dodd-Frank Act," which concludes that the Dodd-Frank Act has "an elegant core of sensible ideas" and should be considered "a fail-safe system with three levels of containment." That is not only for the benefit of our economy, our treasury, and our taxpayers, but also for banks and, yes, bankers, who just don't get it -- yet.