In my view, the three prevailing schools of thought on financial reform are as follows, with many economists sharing one or more features of the three:

1. Make the banks that engage in higher risks – mainly investment banks – smaller. Smaller investment banking sector is the most reliable path to smaller risk. Do this by restoring some or all of Glass-Steagal, which put firmer separation between investment banking using commercial and community bank depositors money. It also restricted selling public shares by investment banks which were predominantly partnerships, and whose own incomes rose or fell with the fortunes of their clients, not through speculation with other peoples savings or bets. An additional argument in favor of the "make them smaller" school – maybe they will have less bargaining power over national industrial and infrastructure policy through their extremely powerful lobbies.

2. Don't focus on making banking smaller. Their may be big political consequences if financing of national debt moves more and more offshore due to scaling down US finance. Plus some argue that there is no sure path to risk reduction through breaking up Goldman, JP Morgan, or Bank of America, or AIG. This group favors national tax, insurance and regulatory policy to control the amount of leverage in the system. This group seems to ignore the essential "fox guarding the chicken coop" behavior and bias (resulting from the flow of professionals in finance between public and private sectors) of the bureaucratic institutions designed to supervise giant, private financial institutions.

3. The unintended side-effects any government intervention are just too awful to contemplate – do nothing and in the "long run," when JM Keynes says "in the long run we are all dead!", markets will reach a "new equilibrium" – only the alleged "invisible hand" knows at what wages or living or social conditions such 'new equilibrium' may bring – perhaps the Pinochet solution! So what? So say the third group, mainly Republicans and those heavily tainted with policies that encouraged the Wall Street Bubble mania in mortgage-backed securities.

While I tend to favor #1, and certainly oppose #3 as completely useless, there is going to be a real problem moving big numbers of ordinary people into action on any financial reform that does not a) restore their lost 401 K pensions; or, b) Give them back their foreclosed home.

The closest thing to that was the cram-down bill by Durbin that got killed early on. That alone speaks volumes about what AFL-CIO President Richard Trumka characterized as our servitude to Wall Street in so many aspects of economic life. No reform under contemplation by Congress at this time, whether from the "make them smaller" or "let them be big but legislate some way to de-leverage them" factions, will bring back lost retirement funds and homes.

But if we think about financial reform in a more fundamental sense as a struggle to implement a collective, social reallocation of investment capital from less productive to the most productive, most strategic applications – then the fight for jobs, which is of such over-riding immediate AND long-range urgency, and affect the overwhelming majority of working families (every other family has a member without work), must inevitably exert the biggest pressure for a stronger national industrial (investment) policy, and thus large public share of investment dollars, and thus a relatively smaller private financial sector.

In a way, perhaps the jobs fight is our best path to impacting financial reform. The jobs fight DEMANDS that government compel the employment of the unemployed AND a net RISING standard of living for all workers.

The level and degree of innovation coming out of the private and corporate sector is constrained in many cases by the stalled demands for more powerful, more broad-based and more efficient infrastructures in many sectors (transportation, housing, connectivity, etc). The excessive diversion into "financial infrastructure innovation" for its own sake, was a truly parasitic development, and appears to have done some serious damage to the private sector's current capacity to innovate, according to innovation expert Michael Mandel. Rapid job creation from that sector may not be able to contend with the still very high levels of risk (and shortage of credit) still plaguing the system.

Perhaps the most important decision of all is where, exactly, to place our collective "bets" on the mix of investments that will promise the best and soundest basis for the future? One must consider many little-knowns and not a few complete unknowns:

    * How much should be invested in primarily scientific and technical research;
    * How much in overall education? Broadbased education reform is, and must be, simultaneously, a) rising standards, values, knowledge and skills; and b) a direct battle against poverty and political or economic inequities by race, nationality, and gender.
    * How much of GDP for health care?
    * How the variables of globalization, and all its economic and security entanglements, including war and peace, will impact available resources.
    * How to mobilize the the people as they adapt to the social changes all the big "bets" will entail. What is the broadest, sustainable, level of democracy possible in making decisions of such magnitude and consequence?--the people, collectively, I believe, make a wiser decisions than merely the most powerful faction at a given time. Accurate information is important in assessing risks, but life experience is what determines the range of uncertainty that can be tolerated.

As long as jobs and the public investment demands of a renewed national industrial and employment strategy are satisfied – perhaps, exactly HOW private financial capital is reorganized and re-regulated are best decided through Darwin's "natural selection" algorithm.