According to former Federal Reserve Chairman Paul Volcker, believes that commercial banks should be separated from investment banks in order to avoid another crisis like the U.S. is experiencing.

“Maybe we ought to have a kind of two-tier financial system,” Volcker, who heads President Barack Obama’s Economic Recovery Advisory Board, said today at a conference at New York University’s Stern School of Business.

“What used to be the traditional investment banks, Morgan Stanley, Goldman Sachs so forth, which used to do some underwriting and mergers and acquisitions, are dominated by other activities we would exclude -- very heavy proprietary trading, hedge funds,” he said. “So there’s some separation to be made.”

Volcker’s comments come as President Barack Obama seeks legislative proposals within weeks for a regulatory overhaul of finance, especially companies deemed vital to the stability of the financial system.

Volcker, who ran the Fed from 1979 to 1987, said the financial industry’s problems stem from larger issues. “I don’t think this is just a technical problem, it’s a societal problem,” he said. He cited bankers on Wall Street receiving multimillion-dollar bonuses for engineering failed mergers.

“There’s something wrong with the system,” Volcker said. “What are the incentives, what’s going on here?”

Wells Fargo said today that its January and February results were “strong.”

The bank made $59 billion in mortgage loans in the first two months of this year, exceeding its fourth-quarter total, the company said today in a statement, and took in more deposits.

Regulators are prodding banks that took money from the Troubled Asset Relief Program to cut dividends as they try to shore up the financial system. Wells announced yesterday it was reducing its dividend 85% to save $5 billion.

Wells Fargo took over failed bank Wachovia last Fall and has suffered in the process. Wachovia had issued $120 billion of option-adjustable rate mortgages (ARMS), and Wells Fargo in the fourth quarter wrote down the value of Wachovia’s loans by $37.2 billion, including $24.3 billion of option ARMs and an additional $7.7 billion in commercial real-estate loans.