It's not the "rule of law" part that's naive, it's the "democratic" part. We still have some semblance of the rule of law (although even that is starting to fray) but there is no more democracy in the U.S. We are a plutocracy, a government of the wealthy, by the wealthy, and for the wealthy. So it is unsurprising that what the banks are doing to rip people off is legal: the banks (and other big businesses) write the laws.
For democracy to be restored for real in the United States, we'd have to see a few things happen. One, there would need to be strong legislation in place to fight insider deals in government. The anticorruption amendment Lessig has talked about is a good start. Two, there needs to be a complete redistricting of the United States under very specific guidelines to put an end to this gerrymandering bullcrap. We should seriously consider raising the number of Congressmen and increase representation all across the US. Gerrymandering is becoming a far larger problem for the long term than any campaign finance anything. Three, there has to be an end to all these corrupt subsidies like the the farm bill and let companies fail and succeed by the market and not by the corrupt government's fiat. That includes banks.
The "rule of law" part sounds good, but in practice, a naive simplification.
A close friend has been a public defender (criminal defense attorney) for 20 years. In her experience observing 20 years of cases, there's a direct correlation between wealth of the defendant and likelihood of getting off.
"The unspoken reality is that in America today there exists two systems of criminal justice. One for the wealthy, which includes kid-glove investigations, lackluster prosecutions, drug treatment, light sentences and easy, if any, prison time. The other, for the poor, is one of paramilitary policing, aggressive prosecution, harsh mandatory sentences and hard time. Wealth, and the political connec tions inherent to wealth, not race, is the determining factor in deciding which system one gets. This is most obvious when wealthy hip-hop artists and athletes, many of them black, are charged with serious crimes. Class trumps race every time, even if the wealth is new found..."
If this holds true for a black guy caught with a gun in NYC, why think it doesn't hold true for a finance guy conspiring against his clients?
Cheat your bookkeeping clients out of 10 grand and you're in the slammer, cheat cities or nations out of 10 billion and you might lose a couple tee times at the country club for depositions.
All this is true, but being wealthy is still not an absolute protection against the law. Even rich people cannot, for example, commit murder with impunity, at least not reliably. But the odds of getting elected to national office (or even state office nowadays) without the support of the wealthy is indistinguishable from zero. That is why I say that democracy is completely dead while the rule of law is only mostly dead.
> lawsuits must be lawful
It's not the "rule of law" part that's naive, it's the "democratic" part. We still have some semblance of the rule of law (although even that is starting to fray) but there is no more democracy in the U.S. We are a plutocracy, a government of the wealthy, by the wealthy, and for the wealthy. So it is unsurprising that what the banks are doing to rip people off is legal: the banks (and other big businesses) write the laws.