Big banks need to decide what they do best, focus on those core competencies and sell off other areas of the business, says Wall Street economist Henry Kaufman.

Today, 10 financial institutions control 75 percent of the country's financial assets under management, with each bank running investment and commercial banking operations under one roof.

"Giant diversified financial institutions operate on both sides of the market — as portfolio managers and institutional investors on the buy side, as underwriters and dealers on the sell side, and as financial advisers on both sides," Kaufman writes in a Wall Street Journal OpEd.

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"These conflicts, which are built into the firms' structures, strategies and decision-making dynamics, often bring them into conflict with the public interest."

Slapping regulations on so-called too-big-to-fail institutions is not the answer, as all it does is give bank management a list of dos and don'ts and leads to more time figuring out compliance and less time making more lasting reform and even approving credit.

Plus, regulators will soon enjoy the technological advantages that the private sector has today that will monitor a big bank's operations in real time, meaning new regulations won't be needed anyway.

"It is not difficult to imagine a day in the near future when credit flow information—data on trades, loans, investments, changes in liabilities, and so on—will flow instantaneously from financial institutions to official regulators," Kaufman writes.

With that in mind, banks should take proactive steps and sell off portions of the business to focus on other areas where they perform best.

"The most critical measure shareholders should insist on is divestiture. The financial conglomerates need to shed some of their activities and become more focused. That strategy would bring several major benefits, for the firms as well as for our financial markets and our economy," Kaufman writes.

"It would reduce their operations to manageable proportions. It would declassify them as 'too big to fail.' It would lessen the role of government in the marketplace. And, in a win-win dynamic, it would enhance stockholder value significantly. All are reasons not to lament the sunset of the giant financial conglomerates."

The Depression-era Glass-Steagall Act prevented financial institutions from acting as both investment banks and commercial lenders, though the law was repealed under President Bill Clinton.

One former Clinton cabinet member says the country needs Glass-Steagall back now.

Today's financial regulations such as the Volcker Rule, which would prevent banks from making trades in capital markets with their own money, are not be enough, says Robert Reich, Labor Secretary under Bill Clinton.

JPMorgan, which lost $2 billion in a recently botched trade, was arguably hedging and technically not trading for financial gain, which would make the Volcker Rule somewhat toothless when dealing with big banks.

The Volcker Rule has been approved by Congress but not yet implemented.

"The Volcker Rule is hopeless. It was intended to be Glass-Steagall lite — a more nuanced version of the original Depression-era law that separated commercial from investment banking," Reich writes in a recent New York Times blog.

"But JPMorgan has proven that any nuance — any exception — will be stretched beyond recognition by the big banks. So much money can be made when these bets turn out well that the big banks will stop at nothing to keep the spigot open," Reich adds.

"There’s no alternative but to resurrect Glass-Steagall as a whole. Even then, the biggest banks are still too big to fail or to regulate."

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