Architect of financial super-banks says 'Break 'em up'

Former Citigroup CEO Sanford Weill says the big banks are too big and should be broken up. Weill was a pioneer in building the banks that have gotten 'too big to fail.' Wall Street is astonished.

By Charley Blaine Jul 25, 2012 3:05PM
Break up the big banks? Yes, that's what Sanford Weill told CNBC in an interview this morning.

Lots of people have called for breaking up the big banks, which have managed easily to swat the proposals away like mosquitoes. But Sandy Weill used to be the CEO of Citigroup (C)  and was one of the foremost promoters of the financial supermarkets that we see today.

When he merged Travelers Group with Citicorp in 1998, he called for the repeal of the Glass-Steagall Act, the Depression-era law that had separated commercial banks from investment banks. The law was enacted to control the speculation that many believed led to the near-collapse of the U.S. banking system after the 1929 stock market crash.

Ultimately, the law was repealed because, as Weill argued, it had become archaic. But many critics have contended the result was bigger financial institutions that took bigger overall risks and destabilized the domestic financial system and the global financial system as well.

Commercial banks take deposits and make loans. Investment banks underwrite stocks and bonds and take much bigger risks. Richard Parsons, the retired CEO of American Express (AXP) and the retired chairman of Citigroup as well, has said the repeal of the law helped create the 2008-09 financial crisis.

Article continues below.
John Reed, who ran Citicorp before the merger with Travelers, has since called for banks and investment banks to be separated.

Even Phillip Purcell, the former CEO of Morgan Stanley (MS), a key ally in Weill's fight to repeal Glass-Steagall, has suggested separation would help stock prices for the financial services industry. 

Sheila Bair, former chairman of the Federal Deposit Insurance Corp., pronounced herself "flabbergasted" by Weill's comments. She has called for banks to be broken up.

Will the banks be broken up? Don't bet on it.

JPMorgan Chase (JPM) CEO Jamie Dimon would surely fight the idea. JPMorgan has built up a huge investment banking business over the years, in part by taking over most of Bear Stearns after its collapse in 2008.

Tim Ryan, CEO of the Securities Industry and Financial Markets Association, said his organization would "vigorously oppose" any measures to go back to the old days. "It doesn't make any sense," he told CNBC.
16Comments
Jul 25, 2012 3:56PM
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Just like way back when they took down Ma Bell (AT&T) and broke her up into little parts - these Wall Street banks need to be taken down to size.  As large as they are they no longer are efficient and have become cheating manipulative conglomerates.
Jul 25, 2012 4:09PM
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Break up the big Wall Street Banks and the 3 major oil companies! Stop oil trading in the futures market.
Jul 25, 2012 3:57PM
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Take them down and show Obama the door at the same time.
Jul 25, 2012 4:36PM
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GLASS STIEGEL SHOULD BE RE-IMPOSED AND THE BANKS NEED TO BE BROKEN UP.  IT WOULD BE BAD FOR THEM BEACUSE THEY RISK AND LOSE AND WE PAY.  THEY RISK AND WIN AND THEY WIN.  THEY WIN EITHER WAY...  WHO WOULD NOT LIKE TO WIN NO MATTER WHAT?  IT JUST GOES TO SHOW WHO REALLY RUNS THE COUNTRY.  OBAMA IS A LIAR.  IT IS SO OBVIOUS WHAT NEEDS TO HAPPEN WITH THE BANKS. 
Jul 25, 2012 6:44PM
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First of all Jamie Dimon has no credibility. Tim Ryan saying "going back to the old days" makes no sense. Tell that to the millions of Americans and others around the world who have lost their jobs, or are now working full or part time in minimum wage dead end jobs, that don't even make ends meet, at no fault of their own. 

 

Dimon's bank and others I'm sure are still taking outrageus risks at the banking system and the economy's s peril. If investment bankers want to take those kind of risks go ahead, but they need to be separated from Commercial Banks and not backed by the FDIC (the taxpayers). Brokerage Houses and Insurance Companies need to be separate too.

 

Our country has been ruined by the banking system we have now. All they care about is making more and more millions and billions for themselves, and screw everybody else. The TRUTH is out there .....  our idiot polticians need to "man up" and see it !!!!

Jul 25, 2012 5:05PM
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Restore Glass - Stiegel and dump Dodd - Frank.  Glass - Stiegel was put into place at the end of the great depression and worked fine fo decades until done away with at the end of the Clinton presidency.
Jul 25, 2012 4:48PM
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We call it as we see it people and often as its happening...We could be up 100, 200, 300, its immaterial; when manipulators are in control those are just sucker's rallies....At about 1500 hrs the call came and scumbags started doing their thing and down we went...The Dow was able to stay in the green, whoopee after 3 days of triple digit losses, the S&P and Nasdaq weren't so lucky and imagine if we didn't close for another 30 minutes....Yup, all in the red and probably another triple digit loss....The sad thing is that we don't see anything changing, crooks will keep cheating and manipulating because they are not scared of getting caught. Insider trading is so out of control its not funny...The SEC you ask? Where are they? Who are they? Incompetent neophytes...Remember Madoff? And what about tomorrow, are they going to stop cheating just because? Everyone would be shocked to learn the amount of money these pieces of dirt are stealing from Americans just like them. Oh well, enough ranting. Back to work tomorrow.
Jul 25, 2012 10:02PM
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As the book title says, "The best way to rob a bank is to own one."

The banks are not only "Too Big To Fail". They're "Too Stupid to Rescue" and management is "Too Big To Jail". Has anyone in bank management gone to jail in the last 5 years?

I'd like to see a poll, asking: "Who is the biggest bank robber: Jesse James or Jamie Dimon?"

Same question: "Who is the biggest bank robber: Bob Diamond or Jesse James?"

Now who do you think would win these polls?

Jul 25, 2012 5:25PM
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It's the Glass Steagall Act and the Gramm Leach Bliley Act was slipped into another piece of legislation to get it past Congress to replace it. Dodd-Frank came much later after Republican-authored legalization of financial sector collusion did. In fact, Dodd-Frank was written to help us fight the terror attack that was GLBA.
Time for change... one of them being the government fessing up to what's the motivation behind nation-crushing bullshipt legislation and all the corruption we endure today.

BTW Sandy Weill... we could all foretell the future when you merged with Travelers. What goes around comes around and what comes from your act of undeniable greed is global financial collapse. Do more than have articles written about your opinions, Sandy. FIX IT.

Jul 25, 2012 10:12PM
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What every American should be asking is-- WHY aren't all banks managing their own irresponsible decisions? We nationalized delinquent credit and set rules for bolstering and saving but didn't do away with Gramm Leach Bliley. Throw the garbage chunk of outrageous legislation OUT and restore the Glass Steagall Act. State banks, not natonal banks. You want to be global? Move.
Jul 25, 2012 10:37PM
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Good, they can finish with getting rid of the Central Banks and the FED. The corruption  and pillage is so tremendous this should have happened decades ago.
Jul 26, 2012 2:30PM
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It’s amazing to me that everyone continually misses the point, had Fannie Mae and Freddie Mac done their fiduciary responsibility and examined the loans they were buying form banks, and NOT bought those that were overpriced, or without paper work showing pay back ability or proof of income then none of this would have happened. Thank you very much Barney Frank
Jul 25, 2012 5:35PM
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As the big banks are in the news nearly everyday, and are too frequently market drivers, especially to the down side...I think the big banks should be broken up.  They have too much of a technology and financial "special advantage" to Hedge the markets by the nanosecond, and controlling by permission too much quantity of commodity, or financial instrument, with little backing.  Very Political subject, but action is needed...Obama's Bank Oversight has failed...he is afraid to drive it and lose voter base support.  Romney can bring knowledged experience, and practiced human resources to the situation...and develop the right "compromise!"

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