JPMorgan Chase’s $2 billion trading loss illustrates the need to tear apart the country’s largest banks, says former New York Gov. Eliot Spitzer.

"These entities are built on the very notion of conflict of interest and are designed to benefit from conflicts and synergies that probably aren’t real,” he tells Yahoo.

“You end up with these structural issues, where one division is supposedly hedging but really doing proprietary trading, using taxpayer money to take these big bets. These are things that wouldn’t happen if we had a more atomized financial structure.”

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.

So what should banks’ size limit be?

Spitzer commends a Wall Street Journal piece by Stephens Inc. CEO Warren Stephens in which he recommends capping a bank’s share of the deposit market at 5 percent, down from 10 percent now.

But, “Breaking them up isn’t just picking a random number,” Spitzer says. “It’s saying they shouldn’t be doing multiple things at the same time -- being a depository institution at the same time that you’re playing investment banker, prop trader, and hedge fund.

At JPMorgan, "[CEO] Jamie Dimon's problem is he's running an institution that's not only too big to fail, it's too big to succeed, and too big to manage," Spitzer says.

Some analysts believe Dimon should lose his job. But President Barack Obama, a beneficiary of Dimon’s support in 2008, tells ABC that the JPMorgan chief is “one of the smartest bankers we’ve got.”

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.