I remember the event as if it were yesterday. The date was December 8, 2010. I was attending the surprise retirement party for a friend and client, Stan Druckenmiller, the most successful financial investor of his gener­ation with the best record of returns in the business. At age 57, he had announced several months earlier that he would retire from managing other people’s money.

As I walked into the dimly lit restaurant’s lobby, I thought of the near quarter-century I had spent as an adviser to the lead trading strategists of a number of large, macroeconomics-oriented hedge funds. This was a world in the midst of dramatic change as a result of the financial crisis that had exploded onto the scene two years earlier. For the hedge fund world in particular, and for financial markets in general, nothing would be the same. The same is true for the economy. The massive financial leverage of previous years was now a faint memory. At one time, the Wall Street banks funneled what seemed like unlimited loans to the hedge funds to take trading positions in various global financial instruments. Not anymore.

As Druckenmiller’s friends were awaiting his arrival, I looked over the crowd and thought to myself: This was not the “One Percent,” the target of the then rabid Occupy Wall Street movement. This was the One Thousandth of One Percent crowd. And all had one thing in common: Every day, they had “skin in the game”—that is, unlike the big Wall Street bankers, they bet their personal fortunes daily in various global markets based on their instinct for how the world worked.

But before the guest of honor arrived, something strange occurred. An unexpected guest arrived: Jamie Dimon, the chairman of JPMorgan Chase. Strangely, it was as if financial royalty had entered the room. A sudden energy was in the air. All eyes were fixed on the confident banker who, compared to his banking competi­tors, had been the most successful in negotiating around the landmines of the financial crisis.

As Dimon stood there, I also thought of Mick Jagger. For whatever the reason, like little boys these world-class billionaire money managers sheepishly made their way toward the banking star, hoping to achieve some momentary face time.

Then it hit me. Here was a situation that was completely absurd. What was happening was a perfect reflection of the degree to which the U.S. financial system had become removed from reality. A room full of the world’s most successful money managers worth billions of dollars, and who collectively traded trillions of dollars daily, were fawning over a mere banker. Although perhaps the best of the lot, Dimon was essen­tially the leader of what had become a collection of giant financial zom­bie institutions that were holding back the U.S. economy.

The situation reminded me how much the human psyche is wor­shipful of the kind of large institutions that form the core of today’s smothering Corporate Capitalism. That night, a room full of the world’s most sophisticated financial thinkers and risk-takers seemed strangely unaware that Dimon, after the financial crisis, was really the little man in the room. The system nevertheless worshipped bigness, and govern­ments and central banks stood ready to serve as the bankers’ valet, eager to be of help. By the time of the retirement dinner, the big banks were already beginning to repair their balance sheets. Perhaps Bill Frezza of the Competitive Enterprise Institute summed up the situation best when he suggested that the big Wall Street banks “perfected the art of privatiz­ing gains while socializing losses. They tested the limits of moral hazard and won.” Yet the rest of the financial system, including the financial heart of Main Street Capitalism—the regional and community banks that finance job creation in the small business sector—remained shattered. Their world was still unhinged.

There is a sense of unfairness about what unfolded. The world has become a collection of winners and losers, and the winners—usually large established institutions—are manipulating the system at the expense of the entrepreneurial newcomers. In 2011, for example, even the high-tech stars of innovation, Apple and Google, spent more money trying to squash or contain technological newcomers (hiring lawyers, extending patents, and purchasing potential rising competitive threats) than they spent on research and development. Tech investor Peter Thiel, who co-founded PayPal, argues that these firms are engaged in “the opposite of innovation; they are monopolies.” Main Street Capitalism, the Great Equalizer, the kind of capitalism that demands a level playing field, is under massive assault in this new zero-sum economic environ­ment where the “big” almost always carry the day.

Not convinced of this thesis? After the 2008 financial crisis, large corporations were flush with cash. Their balance sheets were as healthy as ever. That’s because, in the years after the crisis under the Federal Reserve’s medicine of near zero percent interest rates, the U.S. corpo­rate sector alone sold several trillion dollars’ worth of bonds and used more than half of the incoming funding to repurchase their own shares. While corporate debt across the board soared, champagne corks popped in corporate board rooms.

This absolute obsession with the big, the established, and the corpo­rate over the small, the new, and the entrepreneurial permeates Wash­ington, DC. But this bias has come at the expense of economic growth. So has the preoccupation with short-term financial gain over long-term prosperity for all.

As a result, average working families, both in the United States and all over the world, have sunk down into the muck of economic disappoint­ment and heartache. The economic strategists are at a loss. They thought the global economic and financial landscape was under their control. Prop up the Fortune 500 and the big Wall Street banks and all will be copacetic. These giant institutions, the establishment firmly believed, are the dominant financial underpinning of the capitalist system. Corporate Capitalism is king. Yet the truth turned out to be a lot more complicated.

True economic success emerges largely as a result of behavioral changes from the bottom up—not the top down. In his book The Evolu­tion of Everything, Matt Ridley points out the fascination by elites with top-down design rather than bottom-up “evolution” when it comes to major achievements in science, economics, and social change. Most breakthroughs evolve without architects and a grand design. They appear suddenly from the bottom up.

Indeed, we live in a world where the elites are constantly being sur­prised, whether by the rise of Facebook or of ISIS. Observes energy-pol­icy strategist J. Robinson West: “The generals always fight the last war. An example is the U.S. energy surge. It was the independents, not the major oil companies or the federal government, that caused the shale boom, responding to market forces. The generals were clueless because big bureaucracies don’t work anymore.”

Since the 2008 financial crisis, increased regulation and the zero interest rate policy have made the business models of the big banks obsolete. Those banks, and their global counterparts, have morphed into heavily regulated, relatively risk-averse organizations, not unlike the lackluster town water or electric utility company. The consolidation of the U.S. financial-services industry since the 2008 crisis has been a counterproductive development. These sluggish banks have held back the economy.

The big banks have access to capital and are protected and controlled by government. What they no longer have enough of is a risk-taking mindset. The bankers are engaged in a process of liquidity illusion. Instead of the banks providing full liquidity to the financial markets, that liquidity for years has been provided by hedge funds and by private equity firms with hedge fund components. Observes hedge-fund man­ager Scott Bessent: “I am no fan of the big banks, but the Fed and other regulators have developed an incongruous posture toward these institu­tions, providing a massive amount of monetary easing on the one hand and regulatory overreaction on the other. The new bank fines and other penalties are stifling normal loan growth and hurting the economy. The regulators were asleep during the housing bubble. The banks’ bad actors from the 2003–2008 period got away. But now Main Street is being asked to pay the price.”

The real concern is that since the 2008 financial crisis, the U.S. bank­ing system has consolidated. Now 80 percent of America’s bank capital for investment is controlled by only a dozen giant zombie banks. Before the crisis, the top dozen banks controlled only 45–50 percent of such capital.

America has entered a new era of politicized banking with decision-making held by relatively few banking institutions, the U.S. Treasury, and the Federal Reserve. In a dramatic reshaping of the U.S. financial sector, today four banks alone—JPMorgan Chase, Bank of America, Citibank, and Wells Fargo—now control nearly 60 percent of all U.S. bank assets (all four banks have been fined for illegal banking practices). Armies of regulators camp out in these big banks every day, looking up the bank­ers’ nostrils. American finance has centralized, and that has been a bad thing for the economy. And so has Washington, DC’s nonstop infatua­tion with top-down economic management.

To be sure, after the financial crisis and all its heartache and economic destruction, having a few big banks become the center of credit allocation at initial glance no doubt sounded reassuring. It was Washington’s idea of controlling financial risk. Yet if the goal was to restore middle-class jobs lost by a decline in the ability of small and medium-sized innovative enterprises to survive, this new financial architecture was insanely counterproductive. True, some of those bankers should have gone to jail. The justice system failed to do its job. Yet the fact remains that a vigorous economy depends on a vigorous banking system. Banks, big and small, are the nerve center of the private economy. Crush the nerve center, and you crush the economy.

In policymakers’ attempts to regulate and restructure away financial risk, however, American working families and small businesses have suffered the most. And unlike in Europe and Japan, the U.S. financial sys­tem until now has never been overwhelmingly dominated by big banks. America has traditionally benefited from a vibrant, multilayered system of financial intermediation. True, banks have always been responsible for a large percentage of overall credit allocation. But both large and small institutions engaged in the deployment of credit to the economy. That is one reason the U.S. economy has historically been a robust job-creating machine and hothouse of innovation. Small and regional bank funds, and community banks, joined venture capital funds, turnaround funds, and private mezzanine financing in contributing to the achievement of a brisk growth in innovation.

To one degree or another, these sources of funding were all committed to Main Street Capitalism. That dynamic is now missing from today’s consolidated banking system. Big banks take a financial risk on Google only after Google becomes Google, not before. Today the coddled Wall Street banks, in many cases now drained of their best talent (who often moved to hedge funds and private equity firms), have become the central focal point of America’s financial universe. Washington, DC, has become America’s new financial capital. And one more thing: If hedge funds are left as the financial system’s private providers of liquidity, that system has a problem. Hedge funds exist for two purposes: (1) to earn a profit for their owners and investors, and (2) to bring efficiency to financial market prices (i.e., to challenge policy officials when they stretch the truth and corporate CEOs when they shade the reality on their balance sheets).

The true shame of the 2008 financial crisis is that the big and the powerful were the most protected because of the risk their failure would pose to the larger financial system. Wall Street banks were allowed to engage in fiction relating to mortgages, particularly home equity lines of credit. They financed second mortgages that often were worthless. Because these loans were not written down, the banks overstated earn­ings and increased bonus pools for their executives. And, lo and behold, these executives often held fundraisers for politicians. Note that part of the banks’ actions stemmed from the insistence by Congress on the sub­sidizing of home ownership through government-sponsored enterprises (GSEs)—such as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).

In response to the financial crisis, policymakers engineered a $700 billion taxpayer-funded bailout. But in this great stare-down between Washington and Wall Street, Washington blinked. Instead of using those resources to confront the problem of toxic waste on bank balance sheets that had forced the banks into this corner of timidity, U.S. policymakers deployed its own version of what the Japanese did in response to their commercial real estate crisis in the late 1980s and early 1990s. Japanese policymakers bowed to political pressure and failed to insist that the toxic assets on the bank balance sheets be immediately marked down in price. Tokyo policymakers “got chicken.” They took halfway measures because removing the toxic assets would have been an admission of fail­ure and sign of disgrace. The entire senior management of the Japanese banking industry would have had to have been removed. In the case of Washington after the 2008 crisis, authorities bought the big banks’ stock. Washington also “got chicken.” Instead of real pricing, the big U.S. banks got Soviet-style Gosplan pricing, based on government-inspired mark-to-market fiction followed by a blind-eyed overregulation by the Federal Reserve.

After the period of consolidation, the big banks began to regain their composure in their new zombie state. But that wasn’t true for small and medium-sized companies, or for the thousands of small, regional, and community banks that fund them. These enterprises were all credit-starved right from the start. And, in many cases, they still are.

Local community banks are the workhorses of the financial system. They supply the vast majority of small business loans. Since the financial crisis, more than 500 of these banks have collapsed, struck down by a crisis environment for which they bore little blame. Is it surprising that since 2008, small business startups and productivity growth rates have been disappointing? One solution, suggested by economist Robert Sha­piro, is for the Federal Reserve—to correct its too heavy-handed regula­tory blunders—to “require or encourage” large banking institutions that draw on the Fed’s cheap credit to identify a specified increment of the new credit creation that goes to young enterprises.

Make no mistake, there was something horribly wrong with the post-crisis picture. And it is clear why working families today are so angry. After 2008, if you were a failed, brain-dead Wall Street banker who nearly tanked the world economy, you had easy access to the Federal Reserve’s cheap liquidity. If you failed as a giant bank, you were consid­ered special. Your bank could systemically bring down the entire finan­cial system. But if you were a struggling enterprise out there alone with a brilliant idea that could someday employ thousands of people, obtaining financing was next to impossible. The normal sources of risk capital had dried up, but no one from Washington, DC, was there with your safety net. The too-big-to-fail banks enjoyed a cost of borrowing far lower than other firms because financial markets became convinced government authorities would never let the big banks go under. The fix was in.

David Smick is a financial market consultant and a nonfiction author. He is the chairman and CEO of Johnson Smick International, an advisory firm in Washington, D.C and the publisher and the founding editor of the quarterly magazine International Economy. He also published widely, including in the New York Times, the Wall Street Journal and the Washington Post.

This article is excerpted from The Great Equalizer: How Main Street Capitalism Can Create an Economy for Everyone by David Smick. Copyright © 2017. Available from PublicAffairs, an imprint of Perseus Books, LLC, a subsidiary of Hachette Book Group, Inc.