Simon Johnson believes the best way to break up the banks is through anti-trust enforcement:

The Department of Justice’s Antitrust Division should be called in to investigate the increasing market share of major banks (remember that Bear Stearns and Lehman are gone), the anti-competitive practices of some market leaders (there’s more than one predatory way to force your rivals into bankruptcy and to move closer to monopoly power), and the broader increase in economic and political power of the biggest financial services players over the past 20 years and the last 6 months - this is potentially damaging to all consumers and, obviously, to all taxpayers.

Think of the costs arising from the market power of major banks - and it is financial market power that makes them “too big to fail”; the FDIC has no trouble handling the failure and liquidation of small banks.  We started this crisis with privately held government debt at around 40% of GDP.  My baseline view is that we will end up closer to 80% of GDP.  This means higher taxes for all of us, and this is absolutely not a “left vs. center” or “left vs. right” issue.  This is left, right, and center against those parts of the center who insist that we should go back to having the same organizations, essentially unchanged compensation schemes (and all they imply about “Wall Street owns the upside and taxpayers own the downside”), and even more concentrated market power in our financial system.

I agree with Johnson in the abstract, but I don't understand how DoJ could break up the big banks spin off smaller banks to private investors when some of the pieces are toxic and no investors would want them. Wouldn't that simply result in the government getting stuck with the toxic pieces?