Instead of subscribing to the "too big to fail" mentality, the question should be what is the return on investment from providing bailout funds to the financial behemoths, he said in a column published this week in Slate.
"Nobody disputes that radical action was needed to forestall total collapse," Spitzer wrote. "But we are creating the significant systemic risk not just of rewarding imprudent behavior by private actors but of preventing, through bailouts and subsidies, the process of creative destruction that capitalism depends on."
A more sensible approach would focus on creating a structure for more contained and competitive financial institutions instead of rescuing existing ones, he said.
The approach, he said, would return the financial market "to an era of vibrant competition among multiple, smaller entities -- none so essential to the entire structure that it is indispensable."
2014: The Year in Music [PHOTOS]