Regulators are looking backward in trying to deal with the aftermath of the financial crisis and subverting free-market capitalism in the process, says James Grant, editor of Grant’s Interest Rate Observer.

“We’ve been on the road to socialization of credit for many decades, and now we’re there,” he told Bloomberg.

“The next time there’s a crisis, taxpayers will ride to the rescue, subsidizing these big dumb banks,” he said.

As a result, these same taxpayers will see their interest income dwindle, as the Federal Reserve again drives interest rates to zero, Grant says.

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He has harsh words for the new financial-regulation law. It requires banks to plan for their own demise. “The too big to fail bank cohort is busy drawing up their pre-planned funerals,” Grant said.

That has no connection to reality, he says.

“What ails us is the preceding absence of crisis,” Grant argues. “Year upon year of good times (led to) a sense in the financial community that nothing bad would happen, because the Fed would be there.”

That, of course, turned out to be wrong. And now regulators are looking behind instead of ahead, he says.

Many other experts share Grant’s negative assessment of the Fed.

David Stockman, President Reagan’s budget director, quipped to The Fiscal Times that “I invest in anything that (Fed Chairman) Bernanke can’t destroy, including gold, canned beans, bottled water and flashlight batteries.”

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