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.
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Ultimately, the law was repealed because, as Weill argued, it had become archaic.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.
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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.
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 !!!!
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?
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.
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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