Some argue Glass-Steagall wouldn’t have prevented the 2008 crisis because the real culprits were non-banks like Lehman Brothers and Bear Stearns. But that's baloney. These non-banks got their funding from the big banks in the form of lines of credit, mortgages, and repurchase agreements. If the big banks hadn’t provided them the money, the non-banks wouldn’t have got into trouble. And why were the banks able to give them easy credit on bad collateral? Because Glass-Steagall was gone.

I’ve also heard bank executives claim there’s no reason to resurrect Glass-Steagall, because none of the big banks actually failed. This is like arguing lifeguards are no longer necessary at beaches where no one has drowned. It ignores the fact that the big banks were bailed out. If the government hadn’t thrown them lifelines, many would have gone under. Their balance sheets were full of junky paper, non-performing loans, and worthless derivatives. They were bailed out because they were too-big-to-fail. And the reason for resurrecting Glass-Steagall is we don’t want to go through that ever again.

My conclusion: We need to resurrect Glass-Steagall. We also need to bust up the big too-big-to-fail banks. Their platoons of lawyers are already busily rolling back Dodd-Frank.

Stephen G. Cecchetti, a professor at Brandeis International Business School and Kermit Schoenholtz, the director of the Center for Global Economy and Business at NYU Stern School of Business

In the aftermath of the financial crisis of 2007-2009, voters want assurance that the U.S. financial system is safe and that the government will not be tempted again to bail out the country’s banks and bankers. Some people blame the crisis on the 1999 repeal of the 1934 Glass-Steagall Act, which had segmented investment and commercial banking in an effort to limit risk taking. In our view, however, separating investment and commercial banking would not have prevented the financial crisis, and its re-imposition will not prevent the next one. What made the crisis so deep were practices that were completely legal and have little to do with Glass-Steagall. For example, many financial institutions that depended heavily on short-term funding operated with very few liquid assets and almost no capital. Some of the largest firms also used derivatives that allowed them to conceal extraordinary risks. The scandal is that many risky behaviors remain insufficiently addressed.

To make finance safe—to prevent runs, credit crunches, and the need for government bailouts—the financial system must be made more resilient to disturbances that undermine the balance sheets of intermediaries. This means requiring greater capital and liquidity buffers, treating the activities of financial intermediaries alike regardless of who is performing them (whether it is a bank, a money market fund, or some other type of “shadow bank”) and modernizing the financial plumbing (including short-term financing mechanisms, collateral rules, and derivatives trading). These changes, combined with a streamlining of the U.S. regulatory apparatus itself, will reduce the incentives to take risks that trigger crises and bailouts, while making the system capable of absorbing the potentially large and unforeseen shocks that will inevitably come. Unfortunately, regulators face powerful opposition from politically connected financial intermediaries and their clients, all of whom benefit from high leverage and implicit, taxpayer-financed, government support. Viewed from this perspective, the focus on Glass-Steagall is a damaging distraction from the job of designing and implementing effective reforms that truly make our financial system safe.