WASHINGTON — Less than 24 hours after his swearing-in ceremony, U.S. Treasury Secretary Timothy F. Geithner surprised Camden R. Fine with an invitation to a one-on-one meeting about the financial crisis.

"I about fell out of my chair," said Fine, president of the Independent Community Bankers of America, a Washington-based trade group with about 5,000 members. He was in a corner office overlooking the White House at the Treasury Department the next morning, telling Geithner that behemoths such as Citigroup Inc. and Bank of America Corp. were a menace, he said.

"They should be broken up and sold off," Fine, 58, said he declared, as Geithner scribbled notes before thanking him for his time and ushering him out into the January chill.

The Treasury secretary didn't follow through on Fine's suggestion, just as he didn't act on the advice of former Federal Reserve Chairman Paul A. Volcker, or Federal Deposit Insurance Corp. head Sheila C. Bair, or the dozens of economists and politicians who pressed the White House for measures that would limit the size or activities of U.S. banks.

One year after the demise of Lehman Brothers Holdings Inc. paralyzed the financial system, "mega-banks," as Fine's group calls them, are as interconnected and inscrutable as ever. The Obama administration's plan for a regulatory overhaul wouldn't force them to shrink or simplify their structure.

"We could have another Lehman Monday," Niall Ferguson, author of the 2008 book "The Ascent of Money" and a professor of history at Harvard University in Cambridge, Mass., said in an interview. "The system is essentially unchanged, except that post-Lehman, the survivors have 'too big to fail' tattooed on their chests."

CONTAINMENT POLICY

After the deepest recession since the 1930s — the world's largest economy has shrunk 3.9 percent since the secon d quarter of last year — and more than $1.6 trillion in worldwide losses and writedowns by banks and insurers, President Obama decided on a policy of containment rather than a structural transformation.

His proposal for revamping the way the U.S. monitors and controls banks doesn't include taking apart institutions, supported by taxpayer loans, that have grown in scope and size since Lehman imploded. The biggest, Charlotte, N. C.-based Bank of America, had $2.25 trillion in assets as of June, 31 percent more than a year earlier, and about 12 percent of all U.S. deposits.

Instead, the Obama plan would label Bank of America, New York-based Citigroup and others as "systemically important." It would subject them to capital and liquidity requirements and stricter oversight, relying on the same regulators who didn't understand the consequences of a Lehman failure. And while companies could be dismantled if they got into trouble, they, their creditors and shareholders could also be bailed out with taxpayer money, according to the plan.

The chief architects, Geithner, 48, and National Economic Council Director Lawrence H. Summers, 54, say they don't think it would be practical to outlaw banks of a certain size or limit trading activities by deposit-taking banks, according to people familiar with their thinking. They said the two men, who declined to be interviewed, and others on Obama's team believe the lines are too fuzzy between banking and investing products and that forcing the divestiture of units and assets would create bedlam.

"It's a very difficult thing to say as a national policy goal that we're going to limit the success of an American firm," said Tony Fratto, 43, a spokesman for President George W. Bush and former Treasury Secretary Henry M. Paulson who now heads a Washington consulting firm.

The lesson of Sept. 15, 2008, is that limits may be necessary, according to Fine and other critics of the government's regulatory proposals.

Lehman, the leading underwriter of mortgage-backed securities in 2008, was done in by too much borrowing and too many real estate investments that couldn't be sold easily. When the property market turned sour and creditors wanted more collateral for loans or their money back, the investment bank had to fold.

It had $613 billion in debt and so many deals with so many companies that its bankruptcy set off a chain reaction the government and other Wall Street firms didn't anticipate. Simon H. Johnson, a former chief economist at the International Monetary Fund, likened it to the fictitious substance ice-nine in the 1963 Kurt Vonnegut Jr. novel "Cat's Cradle," one drop of which could crystallize all the water on Earth. The Chapter 11 filing froze the global financial infrastructure.

MORE FED CLOUT

The president's fix is to empower the Fed to put the brakes on banks, hedge funds, insurers or other financial firms whose crash could have a crippling domino effect. About 25 companies may qualify based on their assets and on factors such as funding relationships, Fed Chairman Ben S. Bernanke has said.

"Special resolution authority would give the government the tools it needs to let firms fail in times of severe economic distress without destabilizing the entire financial system," said Deputy Treasury Secretary Neal S. Wolin.

A Financial Services Oversight Council — made up of the heads of the FDIC, the Securities and Exchange Commission, the Commodity Futures Trading Commission and other agencies — would advise the Fed on potential threats.

The Treasury would be able to take over and wind down financial institutions with an authority modeled on powers held by the FDIC, which guarantees deposits and can close and sell failing banks under its jurisdiction.

EYES ON MENACE

The existence of such a regulatory framework might have averted Lehman's chaotic end — and the economic crisis that followed — because cheap money wouldn't have been allowed to inflate a real estate bubble with questionable mortgages and mortgage derivatives, according to Austan Goolsbee, a member of the president's Council of Economic Advisers.

"One of the fundamental principles of the plan is that if you're menacing to the system, someone is going to regulate you very closely," said Goolsbee, 40. "They're going to be in there watching everything you do."

As much as it might mitigate some risks, the Obama strategy is fatally flawed because it fails to force the largest banks to change their behavior, said Johnson, the former IMF economist.

"The biggest problem is it doesn't deal with too-big-to- fail," Johnson said. "It doesn't say anything."

Volcker, the 82-year-old head of the president's Economic Recovery Advisory Board, would subject money market funds to the same regulatory burdens as banks, demanding they hold capital to protect against losses like those suffered by the Reserve Primary Fund when Lehman's bankruptcy touched off a run and more than 60 percent of its assets were withdrawn in two days.

Another critical change, according to Volcker, would be to prohibit big, interconnected companies that handle essential services such as deposit-taking and business payments from making high-risk bets with their own money in so-called proprietary trading.

Bair, the FDIC chairman, has taken a different tack: She wants to check growth by charging fees based on the risks banks take. If Lehman had to pay for its gambles, it might not have held $84 billion in mortgage investments and loaded up on mortgage-backed securities in early 2008, after the subprime crisis began.

Four U.S. companies — Bank of America, JPMorgan Chase, Citigroup and San Francisco-based Wells Fargo & Co., which bought Wachovia Corp. eight months ago — have grown to command 46 percent of the assets of all FDIC-insured banks, up from 37.7 percent a year ago.

"Nothing has changed except that we have larger players who are more powerful, who are more dependent on government capital and who are harder to regulate than they were to begin with," said Nomi Prins, who was a managing director at Goldman Sachs before leaving in 2002 and becoming a writer. "We're in a far less stable environment."