There is a need for investment banks to be regulated like commercial banks, according to former Fed Chairman Paul Volcker testifying before the Congressional Joint Economic Committee on Wednesday morning.

"Large commercial banks have themselves taken on important characteristics of investment banks, but the investment banks and hedge funds that have come to dominate the trading, if regulated at all, have not been closely supervised with respect to their safety and soundness," he told the Congressional Joint Econcomic Committee.

Volcker also observed that the Fed's involvement in the mortgage market is a shift from traditional practices. Consequently, as the Fed's responsibilities have expanded, so has the need for some internal restructuring of the organization.

He also highlighted the need to examine the role of credit rating agencies during the credit crunch and called for better regulation of the financial system on a global level.

By Erik Kevin Franco and edited by Nancy Girgis