No one likes a bailout, particularly one caused by taking a simple and valuable business -- like, say, home loans -- and turning into a complex labyrinth of indecipherable derivative contracts.

Unfortunately, regulations aimed at preventing such a bailout in the future are instead incentivizing banks to once again transform simple business loans into complex collateralized loan obligations (CLOs). 

Mega banks like JPMorgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC), and Citigroup (NYSE:C) are leading the trend, finding clever loopholes in the regulations to bypass capital rules and go back to business as usual. In the video below, Motley Fool contributor Jay Jenkins explains exactly what these banks are doing and why, highlighting the folly of today's regulatory reforms.

Fool contributor Jay Jenkins has no position in any stocks mentioned. The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of Citigroup Inc , JPMorgan Chase & Co., and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.