While I see alot of the wisdom of what Allen and Dave are saying, I think there are two problems that they are overlooking in their “play the hand we have” outlook.

1) Change only happens when we are stressed. It took the repeated depression like swings of 1900-1939 to get alot of the rules we have/had about banks. When things get better, we will have no inputus to go back. One or two of the weakest banks wont heal, and changing the rules will “come to early”; because it will forever be to early for them. Atleast until the height of the next bubble, when everything is perfectly awsome, and then it will be dracoionion measures that caused a recession (read bubble burst) that cause more ‘hold my nose and do it’ backpeddling on the rules.

2) Stable responsible banks exist. They are lead by old school guys who fought their boards/stockholders when they were ‘only’ making 8% returns and everyone else was ‘earning’ 15%. They knew 15% was a joke, and would blow up in their faces, and they were right. If the rules are changed and the responsible punished for being responsible, then next time everyone will go for 15% and will just cozy up to their local politican as insurance. So we get more corrupt politicans and more unstable banking. Just what we need.
We could avoid this, except for #1 above.

I would say that a reasonable idea would be to make the changes temporary, like, “for the next two years…” and then hold to the date. But we have tried that time and again, and as the date approaches, the lobbying intensifies, and we delay again, and we end up back at #1. Perpetual temporary changes are no different than just changing the rules.