Returning to Glass-Steagall would prohibit banks from doing EXACTLY what they did and that is
1) commoditize mortgages
2) bundle mortgages
3) play loose and fancy free with the designations of credit risk on those bundled mortgages
All three of those steps were primary enablers to the current crisis. Glass-Steagall would return banks to a position where they are risk takers on a small scale instead of being risk takers on a grand scale. Stability of the banks is on of the corner stones of a sound financial system.
Countrywide (and others) did all three, before and after G-S repeal.
“The names may have changed, but the game stays the same.”
Well, there is nothing wrong with Banks selling mortgages in bundles, the problem lays in the taxpayer being forced to subsidize those banks via the FDIC.
To me, they can be traditional banks, or investment banks, they cannot and should not be both if they are on the FDIC plan.
Imho a bank that wishes to engage in those activities should remove themselves from the FDIC pool, and either create their own insurance pool or self insure.
Glass Steagel revived is not the way to go, something completely new is needed but we will never see that day.