Why aren't all journals open access?

Here is the way the current system of academic publishing works, as far as I can tell: universities employ researchers who do original research, and produce journal papers; universities employ researchers who do peer-review, and make sure journal papers are up to standard; journals employ editors, who put the content together, and organise the referees; universities pay large amounts of money to journals in order to be allowed to read the articles.

Now, as you can see all of the money in the system comes from the universities. Universities pay the wages of the researchers and the reviewers directly, and they pay the wages of the editors indirectly (through journal subscriptions). So, here's an idea; why don't the universities club together to buy the journals, employ the editors directly, and publish all the content for free?

Note that buying the journals doesn't cost the universities (as a group) anything in the long-run, as the entire current value of the journal companies comes from the amount of money they expect to be paid in journal subscriptions by universities in the future. And there's no need for the journals to charge "submission fees", as those were all being paid by the universities in the first place: they can just come out of the communal pot.

So far as I can see, there is literally no downside to this - assuming coordination can be achieved, you have the same universities paying the same amount of money to the same people to produce the same articles, but the articles are now all available open-access. I admit that "assuming coordination can be achieved" is a fairly hefty assumption, but given the massive upsides, why isn't anyone at least suggesting this sort of approach?

There seems to be a general trend towards open-access publishing anyway, which is a Good Thing, but I don't undestand why this model isn't a strict Pareto improvement on the current system.