Continuing with the Moyers transcript:

JAMES KWAK: I think the distinction you made is a very good one. Between changing the regulation of Wall Street and changing Wall Street itself. I think the bill does a lot of things that will improve the regulatory system.

I think it does not do a lot to change Wall Street. Certainly, better regulation will change Wall Street a little bit, but some of the basic fundamental issues, I think, for example, the fact that in many realms, Wall Street banks knowingly make money by finding, because they want to put on a trade, they find a sucker to take the other side of that trade.

[. . .] And that's one reason I think why it's not going to satisfy the many people in America right now who are upset and frustrated about what's happen. Because they're going to see that what we've done is we've made Washington a little bit better at regulating Wall Street. We haven't changed the fundamental causes.

BILL MOYERS: Well, I've seen one regulatory agency after another taken over by the very industries they were supposed to regulate.

SIMON JOHNSON: This is absolutely right, Bill. And, you know, the person who nailed this intellectually a long time ago was from the University of Chicago. George Stigler. Not a man of the left. He got a Nobel Prize for his observation. All regulated industries end up with the industry capturing the regulators.

And what's happened to us is a Stigler, exactly what Stigler warned against on a massive scale. And you have to think very hard about this. The Administration still argues that we should delegate responsibility, going forward, for lots of things around finance. Like how much capital you should have. Delegate that to the regulators.

Now, that's crazy. That's not acceptable. That is not what they should do. Particularly because, and any Democrat should say, well, wait a minute, next time a free market President who doesn't believe in regulation comes in will gut the system. And any person from the right who's read Stigler should say, Well, these regulators are just going to get captured. You've got to put it in legislation. You've got to design the legislation. You've got to go after the things that can be legislated. Congress must not abdicate this responsibility.

(Emphasis supplied.) This is a convincing argument. But a more accountable Congress is easier said than done. But how to achieve that? It seems to me that in the real world, Elena Kagan has the better of the argument. Congress is what it is. But how to regulate key industries can be focal points in Presidential elections.It seems to me more plausible and indeed, more small-d democratic, to have these questions decided at the Presidential level.

In short, Congress will not pass the laws that Johnson, Kwak and every one who has thought about this thinks needs to be passed. But a President who will be blamed for the failures of regulation by his Administration may act to avoid the blame. Because a structure of accountability is more easily created.

In the short term, of course pressing the Congress to enact meaningful, specific and express rules for Wall Street is laudable. And some of the rules seem doable now:

BILL MOYERS: So, you would break up the banks. That's what you would do, right?

SIMON JOHNSON: We would set a hard size cap on the banks. And the banks, in order to comply with that, would have to break themselves up. So, take a bank like Goldman Sachs, for example. It's about ten times bigger than what we would be comfortable with. And, you put that cap in-- they have to figure out how to do it. They have a fiduciary responsibility to their shareholders not to lose value as they comply with this law, not a regulation, law, right?

Of all the proposals I have heard, this is not only the one that seems most effective, it also is the most doable and politically possible.

A President and a Party can run on this issue. "Too big to fail" is a line everyone understands.

Speaking for me only