Cleaning up the system will take at least three years because banks no longer trust each other or their customers, says James Kenneth Galbraith, the former executive director of the congressional Joint Economics Committee.

Bank customers don't trust banks, either.

"This is a poisoned well," Galbraith said in a PBS interview. "My feeling is, if it is done correctly, aggressively, effectively, we could begin to work out of it in three years."

Cleaning up the banking mess will necessarily include a fair amount of criminal prosecution, Galbraith says, due to the large amount of fraud perpetrated by housing loan originators and appraisers.

According to Galbraith, the process of voluntary regulation gets taken over by those people most intent on evading it, who then drive the complying firms and businesses to the wall.

"They out-compete them," Galbraith said.

Going forward, regulators should treat banking like a utility with limitations on growth, rate of return, and credit that makes creating transparency and evaluating financial products much easier.

"(No more) of this over-the-counter, occult, too-complex-to-value stuff," Galbraith says.

Galbraith's regulatory position is now supported by former U.S. Fed chair Alan Greenspan, once an advocate of less, not more, rules on banks.

"I made a mistake in presuming that the self-interests of … banks and others were such that they were best capable of protecting their own shareholders and their equity in the firms," Greenspan recently told a congressional committee.