As a piece of actual legislation, the effort to revive the Depression-Era Glass-Steagall Act is probably dead on arrival. But as a method of keeping pressure on big banks to rein in their risk-taking ways, the fight could be effective.

Few analysts believe a bill proposed Thursday by a bipartisan group of Senators, including Elizabeth Warren (D-Mass.) and John McCain (R-Ariz.), that would once again separate riskier banking functions such as trading and asset management from banks’ traditional roles offering savings and checking accounts will pass muster in Congress.

To put it bluntly, the pressure from big banks with the most to lose from passage of the bill, mega-banks such as JPMorgan Chase (JPM), Bank of America (BAC), Citigroup (C) and Wells Fargo (WFC), will be hard to surmount.

Since the repeal of key elements of Glass-Steagall in 1999, which allowed for the merger of Citicorp and Travelers Group, a marriage that created the first financial superstore, big banks have embraced the concept of being all things to all people, and reaped massive profits along the way.

It’s not that the big banks couldn’t separate their businesses. They could.

“In general, there’s no conceptual reason that breaking up the integrated firms couldn’t be done,” said Jay Ritter, a finance professor at the University of Florida. “Just as other conglomerates have broken themselves up, financial supermarkets can do the same.”

Indeed, giant media companies are splitting themselves apart as this is written, notably News Corp. (NWSA), formerly the parent company of FOXBusiness.com, which separated its publishing assets from its movie and television units last month to appease shareholders who believed the print business was dragging down the rest of the company. The Tribune Co., owner of the Chicago Tribune and Los Angeles Times newspapers and numerous television stations, announced a similar split earlier this week.

Those moves were set in motion by the companies themselves, however, and viewed nearly universally as positive steps to exploit the most successful elements of sprawling companies that needed to adjust to shifting business dynamics.

Pulling apart some of the most profitable and powerful companies in the world at the demand of Congress would be another thing altogether.

“I would bet against it,” said Ritter.

Leverage for Reform Effort

The loudest argument in favor of reviving Glass-Steagall, first adopted during the height of the Great Depression, is that repeal of the law enabled – encouraged even – formerly “plain vanilla” commercial banks to delve into far riskier businesses such as packaging and selling securities-based derivatives. When those risks went sour those banks had to be bailed out by the government because it was cheaper to bail them out than to cover all of their federally insured deposits.

McCain addressed that concern when introducing he and Warren’s 21st Century Glass-Steagall Act. “Big Wall Street institutions should be free to engage in transactions with significant risk, but not with federally insured deposits,” he said.

Ironically, a number of high-profile Wall Street executives inextricably tied to the emergence of the financial superstore, not least former Citigroup CEO Sandy Weill, have come out in recent years in support of once again separating banking functions and scaling back the scope of so-called “too big to fail banks.” These born-again business leaders now argue that giant mega-banks pose a risk to global financial security because of the domino-effect that would result should one fail.

On the other hand, “it’s not clear that the repeal of Glass-Steagall was the fundamental reason contributing to the 2008 financial crisis,” noted Ritter.

Lehman Brothers, which collapsed in bankruptcy in September 2008 due to broad overexposure to mortgage-backed securities that eventually went bad, had no commercial banking operations. It was purely an investment bank. And Washington Mutual, which also collapsed in 2008, was purely a savings and loan bank.

“There were integrated firms that got in trouble and there were independent financial institutions that either required massive taxpayer bailouts or went under,” Ritter observed.

Both Warren and McCain have acknowledged that revising Glass-Steagall is not a panacea for reforming the still wild and woolly U.S. banking system. But their effort could provide leverage for other measures that have broader support, such as forcing the big mega-banks to increase their capital levels as insurance against isolated internal mishaps such as JPMorgan’s $6 billion ‘London Whale' debacle or broader economic downturns such as the credit crisis of 2008.

Rather than fighting all manner of reform, the big banks could well decide to accept less Draconian measures such as raising their capital requirements in favor of pulling their highly-profitable business models apart at the seams.

Follow Dunstan Prial on Twitter @DunstanPrial