An industry that would not even be functioning without massive government help is now spending money at a record pace to prevent legislators from fixing the system so as to avoid a repeat. Set aside conflict of interest issues. The sheer gall of banker arrogance and self-interest is inexcusable. As none other than Treasury Secretary Timothy Geithner told Bloomberg News on Friday, even Goldman Sachs' protestations that it would have weathered the financial crisis without government assistance are nonsense.

"The entire U.S. financial system and all the major firms in the country, and even small banks across the country, were at that moment at the middle of a classic run, a classic bank run," Geithner said.

Of the biggest banks, "none of them would have survived a situation in which we had let that fire try to burn itself out," he added.

So how do we resolve the First Amendment issues associated with campaign finance reform? A Wall Street executive who takes a job at the White House is supposed to put his stock holdings in a blind trust. Judges are expected to recuse themselves from ruling in cases in which they might have a personal interest. Why do the financial institutions who profit from derivatives trading get a vote on how that business should be regulated? A recent analysis by Sanford C. Bernstein & Co. theorized that JPMorgan could lose $800 million a year in profits if the "most stringent" derivatives legislation was passed.

JPMorgan's opinion on derivatives reform is obviously hopelessly compromised. Our society regards freedom of speech as sacred, in part because good ideas are supposed to drive out bad. But bad ideas that have a half-billion dollar wind at their back aren't too easy to shout down.

No one managed a more devastating critique than Jim Bunning, R-Ky., who stared Bernanke in the eye and said, "In short, you are the definition of a moral hazard." Ben Bernanke's tenure as Fed chairman, in other words, is a guaranteed get-out-of-jail-free card for reckless financial institutions, no matter how apocalyptic their mistakes.

Fans of Jim Bunning and Bernie Sanders do not often find common ground. Bunning is fond of labeling anything he doesn't like as "socialist." Bernie Sanders is the closest thing the U.S. Senate has to an actual living breathing socialist. The moral of this story is that there is a definite hazard to being the Federal Reserve chairman during a great economic disaster. No matter what happens, some of the blame will stick to you.

And some of it is no doubt deserved. As the inheritor of the Alan Greenspan legacy, Ben Bernanke continued his predecessor's policies, made no moves to clamp down on an out-of-control mortgage lending sector, underestimated the dangers posed to the overall economy by the subprime implosion, and was an integral player in the age of the great Wall Street bailout.

On the flip side, the vast majority of economists believe that once the enormity of the crisis became inescapably manifest, Bernanke moved forcefully and innovatively to flood the financial system with liquidity by any means necessary, and helped prevent, for now, a second Great Depression. That's kind of a big deal. Bernanke's faults and flaws notwithstanding, it is entirely possible that the world is very, very lucky that one of the most acclaimed academic specialists in understanding the first Great Depression was in a position to do something meaningful when all hell broke loose.

But of course no one can prove that Ben Bernanke saved us from the Great Depression. For better or worse, we live in the now, and the now includes 10 percent unemployment while bankers return to their pre-crash plutocrat status quo. People are angry, and politicians are expert at channeling that anger.

All the Senate grandstanding would carry considerably more resonance, however, if the Senate could find the guts to follow through on all of its tough talk and pass financial reform legislation with teeth. Instead of picking on Ben Bernanke, how about some action on regulating derivatives, breaking up too-big-to-fail institutions, and strengthening the power and efficacy of existing regulatory bodies? While the House passes bills, the Senate specializes in squelching or eviscerating them.

Ben Bernanke might be the definition of moral hazard, but the Senate is the definition of government failure.

For Bloomberg and the WSJ, the effort was described as, to borrow the Journal's words, a move that "will allow the bank to begin escaping pay and other restrictions imposed by the U.S." BofA plans to use around $26 billion that it happens to have lying around and raise another $18.8 billion via sales of stock and warrants to buy stock.

Since the U.S. government never really managed to use the leverage that it had obtained by bailing out Bank of America, other than to make some token gestures at limiting compensation, and possibly ousting Ken Lewis as CEO, there will be few tears shed at the prospect of the bank getting out of hock to Uncle Sam. But I'm still intrigued at the spin. Instead of being portrayed as a sign of health or market stability, the effort to return TARP funds is instead seen as a first step to freedom. The freedom to pay executives far more than they deserve! The freedom to thumb noses at regulators, and in fact, to redouble efforts at lobbying to make sure that regulators don't interfere with their god-given right to steer us directly into the next financial cataclysm.

It's hard to even imagine that earlier this year there was even a whisper of a suggestion that banks as big as the Bank of America should be nationalized or forcibly broken up. The status quo is resuming with amazing speed. At the rate events are moving, maybe we can have another financial crisis in time for the midterm elections.

A staunch critic of bailouts, Buiter has been especially vicious towards Citigroup; in April he called the financial institution "a conglomeration of worst-practice from across the financial spectrum" and in June he described the decision by U.K. finance minister Alistair Darling to appoint former Citigroup CEO "Win" Bischoff to "to co-chair the writing of a report on UK international financial services" as "the most ridiculous appointment since Caligula appointed his favorite horse a consul."

I'd like to suggest my own contribution from the Buiter archives. In September 2007, Buiter took issue with what he characterized as then-Financial Times columnist Larry Summers' "never seen a potential bail out he did not like" predilection in a blog post titled "Support Markets, Not Banks."

I cannot think of a single financial institution that is too big to fail, in the sense that it would damage some systemically important social institution.... I recognize the upside of bail-outs for those who arrange them: they look like movers and shakers, making and shaping events. It's heroic, in an industry where heroism can be rarely displayed. But in all of the examples mentioned above, the bail-out did more harm than good.

So now Buiter will be taking a paycheck from one of the very biggest of the bailed-out too-big-to-fail institutions. Which means, whether he likes it or not, Buiter is being bankrolled with the support of the American taxpayer... and implicit backing of Larry Summers. If Citigroup hadn't been bailed out, would Buiter have gotten this job?

The scourge of unemployment is splitting America into three groups: 1) the third just mentioned, whose households are in danger of losing their homes and whose kids are surviving on food stamps (that's up to one in four children in America today); 2) the vast majority of Americans who are managing but worried about keeping their jobs and homes; and 3) a small number who are taking home even more winnings than they did in the boom year 2007.

Prominent among Category 3 are Wall Street bankers, many of whom are now concluding their most profitable year ever. Goldman Sachs is so flush it's preparing to give out bonuses in a few weeks totaling $17 billion. That will mean eight-figure compensation packages for lots of Goldman executives and traders. JPMorgan Chase is rumored to have a bonus pool of around $5 billion. The three other major Wall Street banks are ratcheting up their compensation packages so their "talent" won't be poached by Goldman or JPMorgan.

Wall Street is booming again in large part because the rest of America -- categories 1 and 2, above -- bailed it out to the tune of $700 billion last year. The Street has repaid some of that but, according to the bailout program's inspector general, much of it is gone forever. For example, the taxpayer money that bailed out giant insurer AIG went directly through AIG to its "counterparties" like Goldman Sachs -- to whom Tim Geithner, according to the inspector general, gave away the store. As Goldman Sachs prepares to dole out some $17 billion to its executives and traders, it's worth noting that Goldman received $13 billion a year ago from the rest of us via AIG and Geithner, no strings attached.

Which brings us back to homeowners who are falling further behind. The $75 billion federal program designed to bribe banks to modify mortgages has been a bust. No one knows the exact number of mortgages that have been modified (that will be reported next month) but housing experts I've talked with say it's a tiny fraction of the number of homeowners in trouble. Seems that the big banks can't be bothered. "Some of the firms ought to be embarrassed," Michael Barr, the assistant Treasury secretary for financial institutions, told the New York Times.

Barr says the government will try to use shame as a corrective, publicly naming institutions that have moved too slowly. But the banks have done almost nothing to date. "We've made dramatic improvements, and we continue to try to get better," says a spokesman for JPMorgan Chase, but as a practical matter JPMorgan has done squat.

Shame? If we've learned anything over the last year, it's that Wall Street has none. Ten months ago Wall Street lobbyists beat back a proposal to give bankruptcy judges the right to amend mortgages in order to pressure lenders to reduce principle owed, just like Wall Street lobbyists are now beating back tough regulations to prevent the Street from causing another meltdown.

Shame? For Wall Street, it all comes down to P.R., at minimal cost. Goldman Sachs, attempting to preempt a firestorm of public outrage when it dispenses its $17 billion of bonuses, is setting up a crudely conceived $500 million P.R. program to help Main Street.

Shame won't work. Only political muscle and courage will. Congress and the Obama administration should give homeowners the right to go to a bankruptcy judge and have their mortgages modified.

And while they're at it, resurrect the Glass-Steagall Act that used to separate investment from commercial banking, so Wall Street can't continue to use other people's money to gamble.

Finally, before Goldman hands out $17 billion in bonuses, claw back the $13 billion Goldman took from AIG and the rest of us and add it to the pool of money going for mortgage relief.