"Wall Streeters recognize that finance has become a political game. When former New Jersey governor Jon Corzine took the helm of smallish brokerage firm MF Global in 2010, he hired—for six figures a month—a consulting firm whose board members included former president Bill Clinton. Corzine’s purpose was transparent: to make sure that he would get a friendly hearing in Washington whenever he needed it. After all, regulators could use their discretion either to help him or to hurt him. In the end, Corzine didn’t succeed in making his firm important enough, so when it failed in October, he found himself without a helping hand from government and now faces a lengthy investigation into possible wrongdoing. Still, Corzine’s look-to-Washington impulse is increasingly the norm in the financial world.

Washington, for its part, understands equally well that it now matters more than markets do in determining the fate of “systemically important” financial institutions. The Economist recently hosted a panel of experts who pretended to be top Washington officials acting for the first time under Dodd-Frank’s authority to wind down failing financial institutions. Larry Summers, who played the Treasury secretary (his real-life role under President Clinton), concluded that all he could advise a president to tell the public in a new crisis was that 'the financial authorities are meeting,' that 'they’re very focused on the situation,' and that 'there’s going to need to be some substantial government direction-setting and control.' In other words, what would govern the financial industry in a future crisis—just as in the last one—would be the panicked, unpredictable rule of men, not a calm, predictable rule of law."

Read on at City Journal.

I remember telling a state legislator back in the late 1980's that his proposed regulation would drive business out of Ohio.  He responded that we really needed his regulation at the federal level; that way businesses wouldn't have anywhere to go.  Seemed simple to him.