A CENTRAL part of the Sanders economic plan is to break up big banks by reinstating the Glass-Steagall Act. Until its repeal in 1999 Glass-Steagall separated supposedly staid deposit-taking banks from riskier investment activities. Today, large “universal” banks like Citigroup and Bank of America both take in customer deposits and trade in risky global markets. Breaking up the banks has some merit as an idea; it is more realistic than many of Mr Sanders’s other proposals (see article). This week, Neel Kashkari, President of the Minneapolis Fed, said it was worth considering (among other policies). Nonetheless, a focus on Glass-Steagall—to the exclusion of other ideas for making banking safer—is misplaced. The root problem with banking is simple; that some banks are “too-big-to-fail”. The problem has two parts. First, the government feels obliged to bail out a large financial institution if it fails. Second, the probability of a bank failing is large enough to be worth worrying about. Glass-Steagall would address one part of the first problem, by moderately reducing the government’s incentive to bail out banks.

One reason governments rescue banks at the height of a crisis is to protect the payments system. If a commercial bank goes into bankruptcy, depositors may not be able to access their funds to pay bills. This is catastrophic for the economy, as it causes spending to tank. Worse, panic over the solvency of one bank can easily spread to others. In March 1933, during the Great Depression, the federal government had to impose a nationwide bank “holiday”—ie, temporarily shut down the payments system—to stop a run on banks.

Today deposit insurance protects customers even if their bank fails. But that does not protect the payments system. During the crisis in 2008 the British government thought it was two hours away from cash machines (ATMs) not working when Royal Bank of Scotland, a universal bank, failed. Separating banks’ investment functions from their commercial arms would ensure the arteries of the economy remain unclogged even when investment banks are suffering. This is one reason the British government has decided to “ring-fence” commercial banking from investment banking (a weaker form of the full break-up Mr Sanders wants).

However, the “too-big-to-fail” problem would remain. First, the government will still want to bail out large investment banks if they fail, because they are so intertwined with credit markets. An investment-banking crash can cut off credit to the real economy. And although investment banks do not suffer runs from depositors, they can suffer runs from those who invest in their short-term debt, meaning panic spreads easily between institutions. That is why, in the crisis, the government bailed out Bear Stearns, an investment bank, and AIG, an insurance company. AIG did not have customer deposits, but it did owe billions of dollars to investment banks who may have failed had AIG gone bankrupt.

Glass-Steagall does not make a crisis much less likely. America saw many financial collapses before Glass-Steagall was repealed. In the 1980s savings and loan crisis, supposedly boring institutions engaged in nothing more exotic than making mortgage loans failed en masse, costing the taxpayer upwards of $150 billion. Long-Term Capital Management, a small but highly indebted hedge fund, collapsed in 1998, imperiling the financial system (the New York Fed oversaw a private sector rescue). Internationally, many European banks were brought down by nothing more exotic than bad loans to real estate companies.

Reinstating Glass-Steagall, then, would not prevent failures, and would not remove incentive of governments to intervene when failures happen. More important is making sure that banks fund themselves with enough capital from shareholders, rather than with debt. To his credit, Jeb Bush has called for this. Capital absorbs losses, because shares can fall in value; debt does not.

More capital reduces the probability of bank failures. That, in turn, reduces the incentive for banks to grow; as the probability of failure shrinks, the advantage of being big—that the government will bail you out if you fail—diminishes too. That is important: some think the only reason banks get big in the first place is to exploit the government’s implicit guarantee. More capital is also a simple policy that makes banks more resilient to risks of any kind, rather than micro-managing what risks they can take. Glass-Steagall, in comparison, is a distraction.