Paul Greenberg

The complex regulations that were going to prevent this kind of thing haven't even been written yet, let alone enforced. And if they ever are, will anyone be able to understand them? Or will they be as simple and clear as the Internal Revenue Code, that encyclopedic morass?

The masterminds in Washington still don't seem to have learned that simple is better than complicated. They're still calling for vague rules some day instead of drawing clear lines now.

This is what comes of tearing down walls that have stood the test of time but couldn't withstand the plans of our history-challenged politicians, and the kind of high-flying financiers whose ambitions are greater than their foresight. Or rather hindsight, for the history of the Great Depression should have taught them -- and the country -- better.

Recommended reading: "How Big Banks Threaten Our Economy" by Warren Stephens in the Wall Street Journal, May 1, 2012. His is the voice of sad experience when he concludes:

"In hindsight, eliminating the Glass-Steagall Act, the Depression-era law that separated investment and commercial banks, was a mistake."

A $2 billion mistake. And it was all too foreseeable, for those who cannot remember the past are condemned to repeat it. That warning of Santayana's has become a cliche by now, and for good reason: It's proven so relevant so regularly.

Isn't it time we learned from the past instead of ignoring its lessons? When it comes to banking, this lesson has a name: Glass-Steagall. Let's re-enact it. We've seen what can happen without it.

But how will our big banks -- like JPMorgan Chase, the biggest -- meet the need for more deposits, and be able to make more loans, and generally revive the American economy, unless they're allowed to run their own investments/hedge funds/credit-default swaps?

Have no fear. If the biggest banks have to stick with plain old, conservative commercial banking -- instead of high-stakes investment banking -- there are plenty of investment houses out there more than willing to take up the slack. And if they're not able to, new ones will spring up to fill the vacuum.

Where there are big profits to be made, and, yes, big risks to be taken, there'll always be those ready to take them, especially with other people's money.

Let's give a new crop of investors room to exercise what John Maynard Keynes called the motivating force of a thriving economy -- "animal spirits" -- and watch those entrepreneurs go. Some will only go broke, but those who succeed, the ones who back the next revolutionary innovation, the next trans-continental railroad or Internet, will improve all our lives.

The big thinkers who claim our banks have to do their own investing (proprietary trading, it's called) need to take their dusty copies of Schumpeter off the shelf and review that part about Creative Destruction. You can't have one, creativity, without the other, destruction. Not in a free market, which is the most productive kind. And the riskiest. As the whiz kids at JPMorgan Chase have just learned.

Better our bankers stick to banking, the old-fashioned kind. And leave speculation to the speculators. Each has a vital role to play in a modern economy but, like church and state, they shouldn't be mixed.

Dividing the two once again -- commercial and investment banking -- would let banks serve the interests of their investors, borrowers and depositors without taking undue risks. And let those interested in risk management manage it themselves, rather than through a federally insured bank. That is, with our money.

Good fences, like the old Glass-Steagall Act, make good bankers.

Paul Greenberg

Pulitzer Prize-winning Paul Greenberg, one of the most respected and honored commentators in America, is the editorial page editor of the Arkansas Democrat-Gazette.