Last month, Sens. Maria Cantwell and John McCain proposed a measure that would revive parts of the old Glass-Steagall Act, the 1933 law that separated investment from commercial banking. After having been diluted many times over the years, Glass-Steagall was largely repealed in 1999, permitting a wave of consolidation in the financial industry.

The latest crisis has provoked a new debate over the old regulatory regime. Nobel laureate economist Joseph Stiglitz has argued that the repeal of Glass-Steagall had an "especial role" in making the financial calamity of 2008 possible. Former Fed Chairman Paul Volcker, currently the head of the President's Economic Recovery Advisory Board, has called for a new separation between commercial banking and riskier financial activities.

Any discussion about breaking up the financial industry, however, runs into a powerful stereotype: the overwhelming consensus belief in the risible backwardness of Glass-Steagall.

In 1999, the last time the 1933 law was being debated, it was routinely described as a "Depression-era" law, a "relic" of a benighted age, "venerable," "obsolete," "outdated," "archaic," insufficient to meet the public's "sophisticated needs" in the bold new era of accelerated everything. The measure that overturned Glass-Steagall in 1999 was, of course, called the "Financial Services Modernization Act."

Having government forbid everyday commercial banks to take gambles on high-risk schemes, why, that just didn't make sense to the enlightened minds of 1999. We had learned by then to trust the market. Besides, what could go wrong? Fears about speculative risk were so 1933!

Today, it is that old critique of Glass-Steagall that strikes one as a relic in need of modernization. Reading through journalistic accounts of the old regulatory regime from 1999 is like watching long reels of ecstatic dot-com commercials or flipping through the metallic-and-fluorescent pages of old copies of Wired magazine and remembering the mind-blowing prosperity that the Internet was supposed to be bringing us.

The business-culture delusions of the '90s may seem obvious today. But at the time, our great thinkers assured us that we had turned a historical corner and the "old rules" no longer applied. Prosperity was eternal. And government was a dinosaur, serving only to impede our pursuit of info-age excellence. Again and again, the narrow agenda of particular interests were cast as freedom for all of humanity.

Consider "The Twilight of Sovereignty," the influential 1992 manifesto by former Citicorp CEO Walter Wriston. Here was a man who had spent much of his career warring against Glass-Steagall and other federal banking regulations. In his book, however, he did not criticize regulation so that Citi might be permitted to become a grotesquely distended too-big-to-fail financial supermarket gambling in whatever schemes would bring the richest bonuses. Certainly not. Wriston instructed us to give up on regulation because we had entered a new stage of history and regulation was now technologically obsolete. "How does [government] track or control the money supply when the financial markets create new financial instruments faster than the regulators can keep track of them?" he asked.

Half-baked historicism like that was persuasive stuff in those days. On the occasion of the old banking law's repeal, President Bill Clinton intoned that Glass-Steagall was "no longer appropriate to the economy in which we live. It worked pretty well for the industrial economy. . . . But the world is very different."

Today, as we begin to debate Glass-Steagall all over again, the old stereotypes are simply being pulled out of deep-freeze. The futility of efforts to "turn back the clock" are noted. A clever put-down from an anonymous Treasury official is much repeated: it "would be like going back to the Walkman."

The old law's revival is said to be a way of pandering to the low emotions of the public, as opposed to its higher faculties of reason. A Business Week story on the subject understands the Cantwell-McCain proposal as a way of "soothing public anger over bailouts and bonuses." Politico's account of the measure chalks the whole thing up to "populist angst," whatever that is.

What no one has yet grasped is that pooh-poohing Glass-Steagall in this way is about as sound a move as was slapping down your savings on shares of TheGlobe.com.

One of these days, we will finally dispel the "New Economy" mysticism that beclouds this issue and begin to think seriously about how to re-regulate the financial sector. And when we do, we may find that the answer involves some version of the idea behind Glass-Steagall-drawing a line between banks that the government effectively guarantees and banks that behave like big hedge funds, experimenting with the latest financial toxins. Hopefully, that day will come before Wall Street decides to take another headlong run at some attractive cliff.

Thomas Frank is the author of the just-published Pity the Billionaire: The Hard-Times Swindle and the Unlikely Comeback of the Right (Metropolitan Books). His other books include The Wrecking Crew, What's the Matter with Kansas? and One Market Under God. He is the “Easy Chair” columnist for Harper’s Magazine and the founding editor of The Baffler.

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