Mr Meacher, the Labour MP for Oldham West and Royton, told a parliamentary debate on financial reform that the UK system remains "dysfunctional" and claimed the foundation of specialist banks would best serve the public interest.
"I believe we need to break up the mega banks," he explained. "Only this kind of fundamental reform â¦ can provide the foundations for the economic and social transformation of this country which we all want."
The former environment minister accused financial institutions of being "addicted" to loaning money to pay for mortgages and warned of the pitfalls of allowing banks to become "too big to fail", which he singled out as a key cause of the crisis.
He also reserved particular condemnation for the country's regulatory authorities, stating that their work in the run-up to the predicament of two years ago was inadequate and placed too much emphasis on the whims of money markets.
Opening the discussion on Monday (November 29th 2010), the veteran left-winger proposed a significant overhaul and recommended separating investment banks from retail divisions to prevent customers' money being used as "collateral".
Bankers' bonuses were also targeted by Mr Meacher, who claimed "enormous" performance-related payouts had helped to create a culture of "recklessness" among certain elements of Britain's financial industry.
Although Conservative member for Clacton Douglas Carswell largely rejected Mr Meacher's argument, he said the UK's centre-right elements had neglected its duty to "think critically about the status quo" in recent years.
The backbench MP added that he believed the country had witnessed a "failure of the free market" and put this down to the absence of an adequate pricing mechanism and an imbalance in the effects of supply and demand upon banking credit.
In an interview with the Independent last week, business secretary Vince Cable threatened financial giants that they could be hit with additional levies if they do not cut back on bonuses.
By Claire Archer