Banks to Separate 'Church' and 'State'

Today's Financial Times says that President Obama is about to crack down on proprietary trading in investment banks. Let me be the first to bet that this will happen sooner rather than later. There will be much criticism of this, with bankers asking if it is really necessary to separate 'church' from 'state' as it were. The 'state' being core banking activities such as lenders and depositories. And 'church' being the lofty prop desks full of guys making bets and praying that they win (and that their bonuses are not taken away by nosy non-believers).
It has started already. The CFTC just separated out the believers (real oil companies) from the non-believers (swaps dealers and speculators), in a bid to control speculative bubbles. Oil companies that supply oil and speculate may have to divide themselves in two in order to avoid trading limits. So is it feasible for large banks to do the same? It could be a little like unscrambling eggs. The prop desks are usually linked in with activities from the sales trading desks (netting what the brokers bring in), internal hedge funds and general hedging. Some say too closely linked.
But I will make a bet that this is going to happen. The reason I say this is because I happen to know that Paul Volcker wants it to happen. Volcker, who is the former chairman of the Federal Reserve Board, is now chairman of President Obama's Economic Recover Advisory Board. And Volcker has been banging the drum about this for some months now. He told the Wall Street Journal in December that "extraneous" activities such as hedge funds, equity funds, commodities and securities trading are secondary in terms of banks' direct responsibilities as lenders and depositors. He believes that these extraneous activities should be sloughed off into separate companies outside the banks where they would have the freedom to contribute to a fluid market without creating systemic risk. He said that this idea has a lot of support.
My bet is placed. By this time next year there will be legislation that banks separate out 'risky' trading activities and focus on what they are supposed to be doing. Anyone care to take the other side?