Michael Lewis details for Bloomberg Businessweek readers the latest observations from former Bank of England Governor Mervyn King.

King’s starting point is that the 2008 crisis wasn’t an anomaly but the natural consequence of bad incentives that are still baked into money and banking — and so quite likely to create another, possibly even greater, crisis. “The strange thing,” he writes, “is that after arguably the biggest financial crisis in history nothing much has really changed in terms either of the fundamental structure of banking or the reliance on central banks to restore macroeconomic prosperity.” The limited liability of shareholders still incentivizes them to allow the banks in which they invest to take greater risks than they would if they were forced to live with not just the gains from financial risk-taking but also the losses. Small depositors, whose funds are being turned into risky investments, are still covered by deposit insurance, so they could care less what the bankers do. Big depositors and anyone else who extends credit to banks still believe the bigger the bank the better, as the bigger the bank the greater the likelihood that the central bank will bail them out if things go wrong. (JPMorgan Chase today, King notes, has the same market share as the top 10 banks did collectively back in 1960.) That isn’t to say that nothing has been done, just that what’s been done is disturbingly beside the point.

The financial system, King reveals, is still wired so that a handful of well-connected people capture the benefits from risk-taking while the entire society bears the cost. Complexity was once used to disguise the risk in the financial system. Now it’s being used to disguise how little has actually been done to fix that system. Or, as King puts it, “Regulation has become extraordinarily complex, and in ways that do not go to the heart of the problem.?… The objective of detail in regulation is to bring clarity, not to leave regulators and regulated alike uncertain about the current state of the law. Much of the complexity reflects pressure from financial firms. By encouraging a culture in which compliance with detailed regulation is a defense against a charge of wrongdoing, bankers and regulators have colluded in a self-defeating spiral of complexity.”