"[W]hile views varied among market participants with whom we spoke, many believed that recent regulatory reforms have reduced but not eliminated the likelihood the federal government would prevent the failure of one of the largest bank holding companies."

That's the bottom line of a Government Accountability Office report that looked into whether the Big Banks are still too big to fail. The most interesting thing in the report is evidence that big banks no longer get lower borrowing costs just for being big (these lower borrowing costs in the past reflected the expectation of a taxpayer bailout). The evidence isn't crystal clear, and some of the models the GAO ran indicated that size gave banks far lower borrowing costs.

If that expectation of a bailout can be brought to near-zero, then that has some ramifications: First, it would suggest that Dodd-Frank may have been successful in reducing the likelihood of a bailout (something I doubted and still have a hard time buying). Second, it would take away some of the arguments for breaking up the big banks. Third, it would reduce some of the justification for stricter bank regulations.

Again, we're not there yet, but this GAO study suggests that Wall Street may move out of the taxpayers' basement and start wearing big boy pants pretty soon.