In recent years, the "second-stage" financial system reform initiated by the Chen administration has been critiqued and challenged, and a lot of researchers essay to explain the cause of the policy failure. Along with the rational choice approach in new institutionalism, this article first attributes the problems to the policy network consisted of plutocrats, president, legislators, and bureaucrats. Their cooperation for self-interest leads to a loss of social welfare. Furthermore, according to the analysis result, the social structure of the network was well established in early 1990s with democratization. Finding indicates the instant is so called "critical conjuncture" of Taiwan's financial reform. The only difference between the past and the present is the objects of transaction. Nowadays, the state transforms state-owned banks to plutocrats rather than bank franchise licenses before.