Congress has begun debate on legislation imposing new regulations on the financial services industry. The declared purpose of the legislation is to prevent the continuation of practices that led to the near collapse of the global credit system and cost American taxpayers hundreds of billions of dollars.

I suppose it should not be much of a surprise that Congress would propose a more complicated remedy, and risk the usual unintended consequences caused by complicated new regulatory schemes, when a simpler and provably effective remedy already exists. Congress often suffers from a peculiar kind of color blindness. Where the rest of us see black and white, Congress sees only various shades of grey.

Let me be clear, credit default swaps and other practices that got the financial services industry and us into this mess should be regulated, and exposed to greater government and public scrutiny. While these practices were leading the nation toward economic catastrophe they were not only incomprehensible to the vast majority of Americans who don't work for investment banks and hedge funds, but to many of the people who bet their institutions' solvency as well as the country's on these transactions. Not to mention the savings of millions of Americans who planned for their retirement or their children's education by investing in the markets.

Yet, the only thing we can ever be certain will be produced by the Rube Goldberg schemes preferred by big governments everywhere and represented in the legislation pending in Congress is that government will hire more people to oversee and enforce the new regulations; more lobbyists will be employed to limit their impact; and affected institutions will add to the size of their legal departments to help them comply with the new rules and find news ways around them wherever they can.

We won't know for some time whether these new regulations will succeed in their avowed purpose of protecting Americans from predatory practices in the financial services industry and making certain American taxpayers are never again asked to pay for the chicanery of institutions that are declared "too big to fail." I wouldn't risk too big a bet that they will.

Had Congress wanted to, it could have addressed the problem with regulatory legislation that had already proven effective in preventing investment banks from becoming too big to fail and discouraging the widespread use of investment practices that court the kind of catastrophic failures that could nearly destroy our nation's financial system.

The Glass-Steagall Act was adopted after the market meltdowns that inaugurated the Great Depression. Its most important provision precluded depository institutions, such as Citigroup, for instance, and the thousands of regular banks small and large American families trust with their savings, as well as insurance companies such as AIG from engaging in investment banking and proprietary trading. Under this clearly defined and comparatively easy to enforce regulation, no investment bank could ever become too big to fail.

When Glass-Steagall was repealed in 1999, depository banks and insurance companies, which controlled the life savings of millions of hard working Americans of modest means, and which truly are too big too fail, were free to engage in investment banking and propriety trading. They became competitors for established investment banks such as Lehman Brothers and Goldman Sachs.

More worryingly, the wealth these big depository banks controlled offered huge new profit opportunities to the investment banks, which became less and less judicious about the risks they took in designing the financial products they offered the depository banks. Their recklessness became viral, spreading toxic assets throughout the financial services industry, and saddling taxpayers with the unprecedented TARP bailout.

Most Americans recognize that the wisest course of action to prevent this from ever happening again would be to re-enact the provision of Glass-Steagall that kept depository institutions and investment banks separate. But most Americans don't serve in Congress, which seldom sees the forest for the trees, and ignores the obvious remedy for the sake of numerous less effective ones.

But those of us who can still recognize the obvious ought to insist that Congress do what it plainly should do to prevent another disaster, and tell the big banks and insurers they are out of the investment banking business now and forever. And tell the investment banks if they want to risk their futures, they can do it on their dime, not ours.

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Fred Tausch of Merrimack is the founder of NH Steward, a grassroots organization committed to holding politicians in Concord and Washington accountable to taxpayers.

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