It’s eight years after the economic collapse of 2008, but for many, the “recovery” has been weak. Wall Street’s recovery has not been felt by Main Street and many now subscribe to the idea the economy is rigged against them.

According to George Gilder, author of “The Scandal of Money,” they might be right. His book looks in-depth at the reasons why the Fed has been unable to spur economic growth. The Fed’s zero interest rate policies have mainly benefited the S&P 500 and Wall Street, “creating a closed loop economy that leaves Main Street out.”

His book speaks to the power imbalance of big banks versus small businesses in their ability to borrow money and the distorted role the Fed plays in our economy:

“The Fed began as a necessary “lender of last resort” during financial crises. But today, the Fed regulates the entire financial sector, from hedge funds to pawn shops. It issues and values the money by manipulating interest rates and manipulating money. Today the Fed serves the Washington bureaucracy and a few banks that are growing bigger. Through these banks, it effectively can regulate the entire economy.”

The Fed favors big banks, the “too big to fail” institutions that the 2010 Dodd-Frank legislation was designed to keep in check.  But Dan Mitchell of the Cato Institute reminds us about the impotency of Dodd-Frank in ending “too big to fail”:

“Sen. Sanders and others on both sides of the aisle have a point. The 2010 Dodd-Frank financial law, which was supposed to end too big to fail, has not. Dodd-Frank gave the Federal Deposit Insurance Corp. authority to take over and oversee the reorganization of so-called systemically important financial institutions whose failure could pose a risk to the economy. But no one can be sure the FDIC will follow its resolution strategy… Neel Kashkari, now president of the Federal Reserve Bank of Minneapolis, says government officials are once again likely to bail out big banks and their creditors.”

Kashkari is someone we should listen to. He administered TARP during the financial crisis. In a February speech at Brookings, he emphasized “too big to fail” is still alive and well. He offered a range of options for addressing it:

• Break up large banks into smaller, less connected, less important entities
• Turn large banks into public utilities by forcing them to hold so much capital that they virtually can’t fail (with regulation akin to that of a nuclear power plant)
• Tax leverage throughout the financial system to reduce systemic risks wherever they lie

He is set to provide Congress with a playbook for tackling “too big to fail” by year-end.

In the meantime, Mother Jones reports “the nation’s 10 largest financial institutions hold 54 percent of our total financial assets; in 1990, they held 20 percent.”

Did someone say concentration of risk?

An eye-popping chart accompanying the article shows just how much bank consolidation has gone on since 1996.  Today the number of banks has dropped from more than 12,500 to about 8,000.

Large banking institutions pose systematic risks to our financial system. When the next bubble bursts, taxpayers shouldn’t be the ones burdened with bailing them out.