Government not only bails out Wall Street and big banks when they fail, but it uses regulation to prevent alternative financial models from succeeding.

I expect regulators to shut down the mini-bank that young entrepreneur Ethan Clay has set up in his ice cream shop. If the state officials the Wall Street Journal spoke to don’t crack down on Clay, Dodd-Frank’s Consumer Financial Protection Bureau will probably drive him out of business.

Politicians and large financiers regularly team up to block alternative financial products. CFAs and angel investors made sure to curb the “crowdfunding” permitted by a recent GOP bill.

These various original – or old-fashioned – attempts at doing finance not only remind us how misguided and destructive regulation can be, they also remind us how pointless our bank bailouts are.

In late 2008, Congress didn’t simply try to prevent a disorderly firesale of financial assets – TARP was largely about preserving the current banking system, as it was. That’s why I call it “protectionism.”

Some people probably thought that without mega-banks as they were constituted in 2008, there would be nearly no access to capital. Others were just cravenly serving the incumbent financial giants.

This bailout-and-regulate system supposedly provides stability – for the big guys afraid of new entrants, it sure does. For the would-be-startups and their customers, it means an less opportunity.