In a sense it’s a measure of America’s misery that in a new era of deflation and tight credit, it celebrates a Bill that curbs the banks.

It won’t actually curb the sort of excesses that caused the crisis, but it will certainly get under the banks’ feet. Given what the country has been through these past two years, to do otherwise would be politically impossible, but this is a time when banks need to be unfettered.

The US, and the world, for that matter, needs a rejuvenated banking system as soon as possible. It needs bankers to take risks and lend money against something other than land, and to lend more than half the property’s value at that. Cash flow lending to small and medium businesses anywhere in the world is virtually dead; bankers prefer buying government bonds and depositing money with central banks to supporting the expansion of businesses.

The result is a gradual, grinding decline in money supply, prices, and economic activity.

What’s lacking is trust. Banks no longer trust their customers or, indeed, each other, and no one trusts the banks. The result of the last point is a 2300-page financial reform Bill that is designed, according to its chief sponsor and chairman of banking committee, Christopher Dodd, to ensure it “never ever, ever, ever happens again”.

Well, it’s certainly fat enough to look like something’s being done to curb Wall Street. There’s nothing like a 2300-page law to make everyone think you’re taking effective action.

In fact, after President Obama signs the Bill into law next week, Dodd-Frank as it’s known, is likely to have more nuisance value than effectiveness. Politically that’s probably enough, since giving banks a headache is an end in itself in the US these days.

The one worthwhile change is to require credit default swaps to be traded on exchanges and clearinghouses instead of over the counter. Also, introducing the “Volcker Rule”, which stops banks from trading their own capital is a curb in the right direction.

But it is hard to imagine that giving regulators the power to seize and break up powerful firms is going to do anything sensible about the problem of “too big fail”. Is the Fed really going to do that to a Goldman Sachs or JP Morgan if it’s both big and successful? And who decides if they are sufficiently “troubled” to warrant seizure and break-up?

Much of what Dodd-Frank decrees is already within the power of Federal regulators — they just didn’t use those powers. The Bill also creates a new consumer protection bureau with the Federal Reserve, except there already is one. As Richard Posner, a professor of the Chicago Law School and judge of the Court of Appeals, wrote in a blog this morning “it is ineffectual because the Fed cares about the solvency of banks, not the solvency of their customers”.

The credit crisis that caused a global recession in 2008-09 was not caused by insufficient financial regulation — so a new Bill won’t ensure that it doesn’t happen again.

It was caused by central banking incompetence at the Federal Reserve under Alan Greenspan, and incompetent application of existing regulatory powers by existing regulators, who had the powers they needed but were asleep at the wheel.

And then, of course, there was the calamitous decision of Treasury Secretary Henry Paulson and Fed chairman Ben Bernanke, to let Lehman Brothers go bust in September 2008, because they didn’t think it would matter. They were wrong.

But as Chris Dodd said last night, “I can’t legislate wisdom”.