Sir John Vickers' Independent Commission on Banking (ICB) will today be accused of a "a dangerous dereliction of duty" by one of the Bank of England Governor's favourite economists.
Sir Mervyn King urged MPs to visit Boston University's professor of economics, Larry Kotlikoff, if they are in the US in testimony to the Treasury Select Committee last year.
In a report to be published today by Civitas, the think-tank, Mr Kotlikoff shows how uncompromising his views on Britain's stumbling efforts to reform banking have become.
In it he concludes: "A banking system that was terribly risky will, on balance, end up riskier, a regulatory system that was dysfunctional will now have many more things to get wrong and a population that was praying for a sure economic future will be left on its knees."
He describes the commission's demand that banks "ring-fence" supposedly low-risk, retail banking from high-risk, casino-style investment banking as an example of "rearranging the deckchairs" and "cosmetics".
Mr Kotlikoff also says the so-called ring-fenced "good banking" could make the situation worse because "good" financial assets can rapidly go bad: "One glance at the current eurozone crisis shows the folly of the commissioners' way. Good/safe, AAA-rated assets, like Italian government bonds, can suddenly turn bad/risky."
Mr Kotlikoff said the commission would allow good, ring-fenced banks, to borrow £25 for every £1 of equity and invest it all in gilts.
"In this case, the commission's ring-fenced banks would fail if gilt prices dropped by just 4 per cent."
The report, Economic Consequences of the Vickers Commission, argues that bankers hold a "stranglehold" on the world's economy and the political system facilitating "recklessly self-serving behaviour".
It says the world's financial system is doomed to fail again because of the "perverse secrecy" of bankers and because of the interdependence of financial institutions that forces governments to intervene when they fail to stave off a potential collapse of the payments system.
"Their [banks') threat of failure and high average profitability gives them leverage over the public and politicians – in bad times, to extract bailouts, and in good times, to operate with minimal transparency and disclosure, to produce extremely complex products that can be sold at inflated prices to unsuspecting investors, and to take on extreme amounts of leverage."
He calls banks "the world's premier secret-keepers" which "deem their proprietary information too valuable to disclose and their agents, the politicians, deem even the most rudimentary disclosure too costly to enforce".
Mr Kotlikoff wants bank deposits matched pound for pound and placed in cash mutual funds which cannot borrow, rather than allowing banks to invest them in risky activities. He said the ICB missed "an historic opportunity" with its failure to do this.
It comes amid increasing pressure on Barclays directors to re-examine the case for hiving off its investment bank in the wake of the Libor interest rate scandal.
With the resignations of Bob Diamond, chief executive, chairman Marcus Agius and Jerry del Missier, chief operating officer, some institutional investors believe it is time to re-examine the bank's structure.
Deputy chairman Sir Mike Rake is conducting a root and branch review of the business. They believe this should look at the case for a split.
"Now is a very sensible time to pause, draw breath, assess what's happened and look again at this question of a ring fence or separation," said Lord Hollick, a member of the House of Lords Economic Affairs Committee.