Manhattan, 2008 = Detroit, 1979?

How many of readers believe these behemoths, our new saviors, could survive the present crisis without unprecedented Fed liquidity support and the pending Treasury solvency infusion? What would have come of Citi and its famous SIVs had it been without a too big to fail option?

Now, after a series of deals, several of which involved the government stripping liabilities of and privatizing assets, these commercial bank holding companies are the new kings of Wall Street, the white knights of our financial crisis. What lessons have been learned? Is it better to be canny and prudent in business, or to have Robert Rubin on your board and Timothy Geithner in your rolodex?

Detroit's big three had a near death experience, and learned that by working the government, they could survive and sometimes even prosper. Working the government meant especially throwing their very bigness around the political system to get subtle little perqs, twists and loopholes in, say, well-intentioned environmental regulations, to keep them going and give them an edge over far superior competitors elsewhere in the world. GM has got to be the most insolvent going public concern in the history of the world, with -$57B in shareholder equity, but the beat goes on, with $25B in new government loans to the big three currently in the pipeline (and $25B more demanded). Imagine an alternative history in which these firms had painfully reorganized in 1980, their plants and assets taken over by lean new competitors with the fear of death in 'em, desperate to learn from and best their rivals everywhere.

Barry Ritholtz is exactly right.

We now have a new big three, each intimately connected to the government monetary and regulatory establishment, and each profoundly too big to fail. They won't abuse the that position, say, to strangle or absorb innovative competitors, would they? Cherish the thought. Thank goodness for the Borg. Who else could have eaten WaMu-Bear-CW-Merill? J.P. Morgan / Washington Mutual / Chase Manhattan/ Chemical Bank / Bear Stearns / Bank One / Manny Hanny, you're my hero!

To those of us who do believe that, despite this decade's toxic experiments, good financial innovation is not only possible, but desperately needed, this looks like the beginning of a new dark age. All the wrong lessons are being learned, as we muddle through an acute crisis by ratifying past idiocies, reinforcing ill-gotten inequalities, and consolidating where we ought to be cutting up.

All is not lost though! There is a scrappy new upstart to really shake up the Wall Street establishment! What was its name again? Oh, right. Goldman Sachs.