Hell hath no fury.

Just when I had convinced myself that behind the curtain, hidden from public view, Barack Obama had a plan—for Afghanistan, for the Middle East, for Iran, for Russia, for education, for energy, for financial regulation, for health care… or at least for some of them—I saw Obama Campaign Manager David Plouffe pitching his book on The Daily Show.

Plouffe was in full campaign mode, selling the successes of the first year of the Obama presidency, as well as his new book—The Audacity of Winning. Grinning and determined, he spoke with an evangelical fervor.

The Audacity of Winning. Coming from the Obama campaign manager, the title itself is at best an ironic commentary on hope as a political strategy, but at worst the title bluntly mocks the electorate that invested their hopes and dreams in the Obama campaign.

Electoral losses this month in New Jersey and Virginia provided a grim reminder to Plouffe and the Democrats of the fragility of their electoral victories of just one year ago. If 2008 was an election year when young and independent voters set their cynicism aside and embraced the hope that a different tenor might come to national politics, 2009 saw young voters abandon politics and independent voters abandon the hope briefly flickered a year earlier.

The voters in New Jersey and Virginia did not get it wrong. They were not impatient. They were not premature in their assessment. By all accounts, the hope Obama offered—the belief that Washington can shift to a new trajectory and engage the real and deep challenges that threaten our nation’s future—is, if not dead, on life support. The past year has been one of deep and unremitting partisan rancor. A year has been lost with nothing to show for it but growing evidence that national politics is indeed a rigged game.

The easy response—and we have heard it for months—is that the Republicans are responsible for the intransigence in Washington. After all, it takes two to tango. But at a defining moment in the healthcare debate, John Boehner threw down the gauntlet. Healthcare reform, he stated, would be Obama’s Waterloo. Defeat healthcare legislation and you defeat Obama. Game on.

But at that moment, President Obama failed to engage the overarching issue of politics and partisanship, and instead the healthcare debate devolved into little more than another Washington food fight. Obama abdicated his commitment to reframe political debate and ceded the field to Congressional leaders with no interest or inclination to keep hope alive.

Harry Reid and Nancy Pelosi had no interest in Obama’s pledge to young and independent voters to change the tenor of politics in Washington, because it is their politics. For Reid and Pelosi, the political price of setting aside the interests of the SEIU and the Trial Lawyers and others in favor of a bi-partisan deal was too high to pay. Instead of reaching across the aisle, Democratic leaders preferred instead to mute industry opposition to healthcare legislation by bringing the industry heavyweights—big pharma, the hospitals association and ultimately the insurance companies—inside the tent. After all, that would only cost money.

The result is legislation that makes a mockery of sensible healthcare reform. It is expensive. It continues deeply entrenched incentives to overspending. Its financing is dishonest. And it protects those industry interests—promising expanding markets and limited cost controls—along with the interests of unions and lawyers heavily invested in the status quo, proving once again the power of lobbyists and contributors to take any major piece of legislation and manipulate it to their benefit.

So was it all just words? One year in, where is the evidence that the campaign that was designed to win by building on the hopes and dreams of the electorate was something more than just tactics? Where is the courage to take the long view? Where is the courage to take on your friends and occasionally accommodate your adversaries? And where is the courage to take on the contributors and lobbyists that neuter and manipulate one legislative initiative after another.

Have we seen any of that?

This year, we have watched events unmatched perhaps since the Gilded Age a century ago, as bankers have dipped their hands deeply into our pockets and those of our children to protect and enrich themselves, and nothing but whimpers from our elected representatives who tell us that this is the way it has to be—even as they take some of that very same money for their own campaigns.

But it is not just the bankers. The pharmaceuticals and insurance industries will dig deeper into the federal trough as subsidized drugs and insurance mandates are enacted. Energy companies and traders are eagerly ogling the new carbon trading bonanza that looms under the cover of cap and trade legislation. And out in the heartland, Monsanto is rewriting the rules of the farm economy under the protection of intellectual property laws that give it greater and greater control over the agricultural economy and farm incomes.

November’s results were not haphazard. Voters have not forgotten or forgiven the Republican sins and profligacy of the Bush years. But that was then and this is now, and Dick Cheney is not on the ballot. But 2010 looms large, and 2012 not long after that, and for all the mocking of the Teaparties, Democrats are skating on thin ice, and there is real anger out there, and disgust and disappointment.

In all likelihood there will be no healthcare bill this year, and that may well be for the better. The Democrat strategy of relying on a narrow, partisan margin was undone in the House when an anti-abortion Democrats upended the political calculus and may leave Democrats to deal with their own internal battles. Then, perhaps, David Plouffe and his associates will look in the mirror. And perhaps they will not like what they see. Barack Obama is not doing well, despite what Plouffe insisted to an incredulous Jon Stewart.

If Barack Obama wants to get reelected, and win votes one more time from the young and independent voters who put him over the top, perhaps it is time he stop playing politics and govern like a president who is willing to lose. Nancy Pelosi and Harry Reid are not doing Obama any favors, and will not win a single young or independent voter to his side next time. Unless he redeems his campaign slogans about changing our politics and demonstrates the courage to do what he promised to do the first time around, Obama will lose anyway, and have nothing to show for it but words.

What are they thinking?

With the announcements of record Wall Street bonus pools, and rising credit card fees, it is time to sit back and see where we go from here.

In the wake of the near collapse of the US financial sector one year ago, Hank Paulson and Ben Bernanke took extraordinary measures to avert collapse. Turning caution to the wind, they arranged shotgun mergers, decided who would live and who would die, and brought the word trillions into our every day vocabulary. By the time they were done, the landscape of American banking has been transformed. Today, the six banking organizations that received $160 billion between— JP Morgan, Bank of America, Citigroup and Wells Fargo, and the former investment banks Goldman Sachs and Morgan Stanley—are now looking to a future in which they can dominate the financial services landscape.

But perhaps the term financial services is misleading in this context. After all, as bank earnings reports were rolled out for the most recent quarter, and news headlines announced the record bonus pools that the banks were preparing to pay, it became clear that these earnings derived from trading activities, rather than traditional commercial bank lending activities. Before our eyes—and with the full support of the Federal Reserve and the US Treasury—the transformation that we have witnessed is not of the conversion of major investment banks such as Goldman Sachs and Morgan Stanley into commercial banks, but rather of each of these firms into government guaranteed hedge funds.

I readily concede that I am using the term hedge fund loosely. After all, hedge fund is a generic term for a relatively unregulated investment vehicle, that is permitted to invest in a wide range of unregulated derivatives and other investments, and whose returns are dedicated to a limited universe of investors. And certainly, the practices of JP Morgan or Goldman Sachs, who undertake massive proprietary trading activities, run huge derivatives books, and dedicate the preponderance of their earnings to senior employees, should not be lumped into the same category.

But on the other hand, if it walks like a duck…

Today, the commercial banking world is sharply divided. With over eight thousand commercial banks and savings institutions, these six firms hold less than 50% market share. Therefore, by traditional measures of market concentration, they are far from monopolistic. But as individual firms, their size dwarfs their cohorts, even considering that two of them, Goldman and Morgan Stanley are not traditional depository institutions. Together, the six boast total deposits of $2.7 trillion, or an average of $444.8 billion per firm. This compares with an average of $107.2 billion for the next six largest banks, and $76.0 billion for the following six. The fiftieth largest—well within the top 1% among all banks—Associated Bank of Wisconsin, has deposits of $16.4 billion.

At the same time, as JP Morgan and its brethren have increasingly concentrated on derivatives trading, loan securitization, securities underwriting and proprietary trading—and as these activities have contributed disproportionately to profitability—the share of bank assets dedicated to traditional commercial bank lending—the type that is most directly linked to the local economy in towns across the nation—has similarly decreased. Therefore, it is not a stretch to suggest that even as the Federal Reserve and Treasury have concentrated for the past year on addressing the risks to the financial system that largely emanated from the largest firms, these firms have at the same time migrated the farthest from the tradition public mission of the commercial banking industry.

It may be hard in the face of the drumbeat of stories about the banks and their problems and their bonuses to remember that commercial banking is an industry with a specific public mission: To take deposits and make loans. It was in the wake of the Great Depression, that the Glass-Steagall Act was passed to restore confidence in the commercial banking industry. Glass-Steagall forced the separation of commercial banking (lending) and investment banking (trading, underwriting), and created the FDIC to insure the deposits of commercial banks.

Beginning around 1980, the banking industry began a steady assault on Glass-Steagall, as investment banking firms sought access to the large pools of commercial bank deposits and commercial banks sought to expand into trading activities that would allow each type of firm larger profit and bonus opportunities. These efforts finally culminated in the Financial Services Modernization Act of 1999, which finally ended the Glass-Steagall restrictions and allowed the complete merger of investment and commercial banking organizations. However, the 1999 Act left FDIC insurance in place, resulting in the hybrid creature that emerged, able to attract government-insured deposits, and utilize those deposits across a range of lending, securities trading, and newly emerging derivatives trading activities.

Today, the financial policy brain trust of Ben Bernanke, Larry Summers and Tim Geithner have rejected calls for structural reforms to the banking system and to reinstate the Glass-Steagall restrictions. Despite the experience of the past several years, culminating in the financial crisis one year ago, they are suggesting that the concentration of power represented by these six firms is acceptable and desirable, and reform efforts should focus instead on the creation of a single systemic risk regulator to oversee those institutions deemed too big to fail.

Standing alone against Bernanke, Summers and Geithner within the Obama administration is former Fed chairman Paul Volcker. Volcker continues to call for the reinstatement of the Glass-Steagall restrictions, and recognizes the imperative of maintaining the link between deposit insurance and commercial bank lending.

It is hard to imagine what Bernanke, Summers and Geithner are thinking, and how they can look at the devastating experience of the past two years, and not conclude that something is fundamentally wrong. Financial modernization did little to help those thousands of commercial banks who have stuck to their knitting, and who now have been sorely disadvantaged by the federal bailouts of their large competitors. Proponents of financial deregulation argue that Volcker and other advocates for turning back the clock are recalcitrant Luddites, yet they have been hard pressed to demonstrate how the creation of the new class of hybrid commercial-investment banks and unregulated derivatives trading have added value to the economy.

Can Bernanke, Summers and Geithner seriously believe that a systemic risk regulator can control the risks that are embodied in these massive firms? Recent history suggests that the risks entailed in the trading strategies, quantitative models, complex derivatives and contract risks were never fully understood by the risk managers, bank CEOs and directors of their own organizations. Bank regulators were captive of the banks themselves as they sought to understand the information that was provided to them. Capital requirements other traditional tools for containing risk proved to be of only marginal value in the face of derivatives with nearly unlimited leverage, and collateralization requirements buried deep in unregistered and unregulated contracts.

Furthermore, political influence over regulators is a fact of life in Washington, and over time will undermine whatever independent structure these three wise men might have in mind. One need only point to Summers’ own success in 1998 in silencing Brooklsey Born—the head of the independent Commodity Futures Trading Commission—when she argued the inconvenient truth of the growing systemic risks presented by the unregulated derivatives market, at a time when Summers and the Clinton administration were arguing the merits of financial deregulation.

It is mind boggling that we can continue down this road. Paul Volcker must be applauded and supported for his unflagging efforts to bring attention to this issue. He is a wise man standing against smart men. And he is right.