David Wessel has a column in today’s Wall Street Journal laying out three approaches to solving our Too Big Too Fail (TBTF) problem. The first two amount to different ways of “busting them up,” as Wessel puts it. The third, which the administration and the Fed have endorsed, amounts to forcing banks to hold more capital, scrutinizing their balance sheets more vigorously, and obtaining some sort of “resolution authority.” That last reform would allow the government to liquidate a megabank in an orderly way (like the FDIC does with smaller banks), rather than either bail them out entirely or simply let them implode, a la Lehman Brothers.  

I happen to support every one of the administration’s proposals on this score. But, despite...