Sanford I. Weill, the former CEO of Citigroup, American Express and Travelers Group, said Wednesday morning that America's "too big to fail" banks must be smashed and torn asunder in order to restore consumer confidence in the financial system.

"What we should probably do is go and split up investment banking from banking," he opined on a Wednesday CNBC broadcast. "Have banks be deposit takers, have banks make commercial loans and real estate loans, have banks do something that's not going to risk the taxpayer dollars, that's not going to be too big to fail."

In other words, Weill advocated that the biggest banks in the country be split up in order to place a firewall between peoples' small deposits and the risky investment banking and derivatives trading companies sometimes engage in. But for Weill to call for that is a dramatic turnaround of the highest order.

Separating investment and commercial banking used to be the law of the land. Instituted in 1933 to prevent another Great Depression, the Glass-Steagall Act was meant to keep peoples' money out of high risk funds unless they wanted it to be there. It worked for generations and would still be working today too, were it not for Weill, whose incessant lobbying helped secure bipartisan agreement on the Financial Services Modernization Act of 1999, shattering the Glass-Steagall firewall.

Freshly deregulated thanks to the Clinton administration, Weill's Citigroup became known as the first true "financial supermarket," where all financial services were on offer -- including some that occasionally cannibalized the company's own investors. By the time markets collapsed in 2008, the "supermarket" known as Citigroup was chomping at the bit for a taxpayer-funded bailout totaling more than $476 billion.

With Citigroup and other banks like JPMorgan Chase, run by former Weill protegee Jamie Dimon, still continuing to take on ever greater risks even in the wake of that crisis, Weill is essentially doing an about-face by saying the "supermarket" model he created has inflicted dire harm on the banking industry as a whole and that the genie must be put back into the bottle before it's too late.

Since the crisis, the nation's five largest "too big to fail banks" have, impossibly, gotten even bigger, going from holding 43 percent of the nation's gross domestic value in 2006 to holding more than 56 percent in 2011 -- a situation that the Dallas Federal Reserve Bank called "a clear and present danger to the U.S. economy."

By agreeing with that assessment, Weill also mainstreams an argument not previously heard from anyone to the political right of President Barack Obama, who has not touched the issue of Glass-Steagall despite his administration's involvement in the financial reform legislation passed in 2009. However, even though President Obama doesn't seem to have the stomach to go against the dogma of big finance, Glass-Steagall has not been without its prominent advocates.

Take, for example, economist Robert Reich, President Clinton's former Secretary of Labor. He's continually urged the president to support reinstating Glass-Steagall, only to be largely disregarded by sitting policy-makers. "Why should banks ever be permitted to use peoples’ bank deposits – insured by the federal government – to place risky bets on the banks' own behalf?" Reich wrote last year. "Bring back Glass-Steagall."

Amazingly, Weill sounded a lot like Reich on Wednesday save but for one tiny exception: he didn't actually mention Glass-Steagall by name.

"I'm suggesting that [the banks] be broken up so that the taxpayer will never be at risk, the depositors won't be at risk, the leverage of the banks will be something reasonable, and the investment banks can do trading, they're not subject to a Volker rule, they can make some mistakes, but they'll have everything that clears with each other every single night so they can be marked-to-market," he said.

Without those changes, "this system is really immobilizing the banking system," Weill concluded.

This video is from CNBC, broadcast Wednesday, July 25, 2012.