ARE THE DAYS OF blockbuster bank profits over? Goldman Sachs (GS: 162.34*, -5.45, -3.24%) reported record earnings today, saying profits in the fourth quarter hit $4.95 billion, well in excess of Wall Street forecasts. But Goldman and other big banks may soon face new restrictions on their size and trading activities, at least if President Obama has his way.

Obama today unveiled proposals to impose new restrictions on firms deemed "too big to fail." The president said he planned to work with Congress to prevent banks from investing in or sponsoring hedge funds or private equity firms, or to engage in “proprietary" trading unrelated to serving bank customers. He also proposed new limits on the size of financial institutions, based on the market share of their liabilities, in addition to their share of deposits. The financial system is stronger today than it was a year ago, he said, but it’s still “operating under the exact same rules that led to its near collapse."

All told, the proposals would force banks to decide if they want to be commercial entities, focused on consumer and business lending, or investment banks that engage in trading, underwriting stocks and other non-commercial activities. Banks were separated along those lines before the 1999 repeal of the Glass-Steagall Act, which allowed firms like Citigroup (C: 3.29*, -0.17, -4.91%) to grow into full financial supermarkets. And investment banks such as Goldman Sachs and Morgan Stanley (MS) converted to commercial banks in 2008 to take advantage of federal bailout programs and bolster their funding through deposits. But banks that take federally insured deposits would no longer be allowed to engage in proprietary trading, according to the proposals, effectively killing the corporate structure of many large banks today.

Of course, Obama's proposals face an uphill climb in Congress, especially in the Senate where Republicans are unlikely to support such a sweeping overhaul. And since they'll soon have 41 votes--once Massachusetts Republican Scott Brown is sworn in--they'll be able to block passage of major legislation.

Even if the proposals squeak through, some strategists say that splitting up the banks is unlikely to prevent another financial crisis. The causes of the crisis were loose monetary policy, low interest rates and the “moral hazard" of government-subsidies for real estate, says Peter Schiff, president of Euro Pacific Capital. Many of those policies are still in place, he points out, with interest rates near zero percent and the government guaranteeing home loans through Fannie Mae (FNM: 1.05*, -0.03, -2.77%) and Freddie Mac (FRE: 1.28*, -0.03, -2.29%). “Tinkering around the edges won’t do anything," he says. And while splitting up the banks may curb some speculation, it “won’t help prevent the next crisis."