The recently passed financial legislation does nothing to diminish the economic and political power of Wall Street banks, says economist and former Secretary of Labor Robert Reich, which means that U.S. taxpayers will continue to have to foot the bill for these banks’ mistakes.

"It does not cap their size," Reich writes in his blog. "It does not resurrect the Glass-Steagall Act that once separated commercial (normal) banking from investment (casino) banking. It does not even link the pay of their traders and top executives to long-term performance."

"In other words, it does nothing to change their basic structure. And for this reason, it gives them an implicit federal insurance policy against failure unavailable to smaller banks — thereby adding to their economic and political power in the future."

The bill is precariously weak in the details, Reich notes. The so-called Volcker Rule has been watered down and delayed. Blanche Lincoln’s important proposal that derivatives be traded in separate entities not subsidized by commercial deposits has been shrunk and compromised, meaning that customized derivates can remain underground.

Moreover, the consumer protection agency has been lodged in the Fed, whose own consumer division failed miserably to protect consumers last time around.

In fact, Reich says, the legislation merely passes decisions about how to oversee the big banks and treat them if they’re behaving badly to regulators, who lack both resources and knowledge to make good decisions.

“(Regulators) are staffed by people in their 30s and 40s who are paid a small fraction of what the lawyers working for the banks are paid,” Reich observes. Many want and expect better-paying jobs on Wall Street after they leave government, and so are shrink-wrapped in a basic conflict of interest.”

“And the big banks’ lawyers and accountants can run circles around them by threatening protracted litigation.”

Investment bank Goldman Sachs has agreed to pay $550 million to settle a civil fraud suit brought by the SEC.