Former Citigroup Head Sandy Weill Calls for Breaking up the Banks

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Dima Gavrysh / AP

Sandy Weill poses for a picture at the Zankel Hall during an interview with Associated Press on Dec. 5, 2007 in New York.

Since the financial crisis of 2008, there have been a host of critics of the banking industry who have called for hard caps on the size of banking institutions, as well as the separation of commercial banking activity like deposit taking and mortgage lending, on one hand, and on the other investment banking, which includes risky behavior like underwriting stock issuance and speculating in financial instruments. This separation was once enforced by a law called Glass-Steagall, which was passed in the wake of the 1929 stock market crash, but which was slowly amended throughout the years, and finally repealled altogether in the late 1990’s.

Predictably, most of these calls have come from regulators or academics, and not bankers themselves. But yesterday on CNBC, Sandy Weill, former chairman and CEO of Citigroup – the bank which more than any other pioneered the era in which financial institutions became one-stop-shops for all financial services – called for once again reinstating separations between investment and commercial banking. Said Weill:

“What we should probably do is go and split up investment banking from banking, have banks be deposit takers, have banks make commercial loans and real estate loans and have banks do something that’s not going to risk the taxpayer dollars, that’s not too big to fail.”

That a pioneer of banking “supermarkets” would himself call for such a separation was such a surprise that CNBC host Andrew Ross Sorkin declared himself “speechless.” But Weill isn’t the only former banker who has regretted the era in which banks rapidly consolidated themselves. According to a report in Dealbook,

In 2009, John S. Reed, who with Mr. Weill forged the megamerger that created Citigroup, apologized for creating a lumbering giant that needed multibillion-dollar bailouts from the government. Philip Purcell, the former chief executive of Morgan Stanley and David H. Komansky, the onetime leader of Merrill Lynch, two other main figures in the fight to repeal Glass-Steagall, have echoed similar concerns about deregulation.”

Of course many of the current heads of the nation’s largest banks are against any forcible breaking up or downsizing of their banks. In Congressional testimony earlier this year, JPMorgan CEO Jamie Dimon defended his banks’ size – arguing that it helped it stay solvent during the worst times of the financial crisis. Another popular argument for large bank’s size and scope is that their clients – large multinational firms – are comparably large and complex, and therefore need banks with deep pockets.

Either way, Weill’s proclamation will give added ammunition for those who wish to impose greater restrictions on Wall St. In fact, the interview has already garnered reaction from Congress. According to a report in American Banker, both Republican Representative Walter Jones and Democratic Rep. Carolyn Maloney reacted favorably to Weill’s comments, with Jones asking Treasury Secretary Tim Geithner in a hearing yesterday, “Isn’t it time we had a debate about the reinstatement of Glass-Steagall?’’

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kenezen
kenezen

Logic is the beating heart of debate.  Jamie Dimon is one of the most talented men in international Banking as witnessed by the successful institution he heads. Sandy Weill created two dynasty's in the Worlds financial arena. Both are admired by this amateur 

compared to them. Jamie is perhaps driven to his conclusion because of current position and power. Sandy is being intellectually reflective. I'll go with Sandy. One real look at the not coincidental events of dropping Glass Steagall in the face of  maturing Private Market that are by far the largest and most dangerous in the world, Derivatives and CDS's. Nearly One Quadrillion dollars, 1000 Trillion dollars! This was the cause of the 2007-2008 crash.

Derivatives are unique in that the pieces that are created, "Tranches", are IO amp; PO oriented, requiring intricate models of great calculitic complexity with 5-12 factors all carefully sorted to give some insight into value given velocity. The secret is, its a guess. If you have historic parameters breached, as occurred in 2007-08, you're probably wrong or the boss didn't want to expense an extreme hedge. 

Two remedies!  First make Public Exchanges like Futures and Stocks for Derivatives and CDS markets with Mark to Market daily and heavy margins (Initial) and ongoing calls.

Second: Separate the Banks. One Consumer, government guaranteed with no proprietary trading .

One Proprietary trading Commercial Bank with no Government subsidy.

Both must have completely separate ownership and unrelated management.

Sorry Jamie    

Firozali A.Mulla
Firozali A.Mulla

Last week Mario Draghi, the president of the European Central

Bank, declared that his institution "is ready to do whatever it takes

to preserve the euro" - and markets celebrated. In particular, interest

rates on Spanish bonds fell sharply, and stock markets soared everywhere. But will the euro really be

saved? That remains very much in doubt. First

of all, Europe's single currency is a deeply flawed construction. And Draghi,

to his credit, actually acknowledged that. "The euro is like a

bumblebee," he declared. "This is a mystery of nature because it

shouldn't fly but instead it does. So the euro was a bumblebee that flew very

well for several years." But now it has stopped flying. What can be done?

The answer, he suggested, is "to graduate to a real bee." Never mind the dubious biology,

we get the point. In the long run, the euro will be workable only if the European Union becomes much more like a unified country. Consider, for example, the

comparison between Spain and Florida. Both had huge housing bubbles followed by

dramatic crashes. But Spain is in crisis in a way Florida isn't. Why? Because

when the slump hit, Florida could count on Washington to keep paying for Social

Security and Medicare, to guarantee the solvency of its banks, to provide

emergency aid to its unemployed, and more. Spain had no such safety net, and in

the long run, that has to be fixed. But

the creation of a United States of Europe won't happen soon, if ever, while the

crisis of the euro is now. So what can be done to save the currency? Well, why was the bumblebee

able to fly for a while? Why did the euro seem to work for its first eight or

so years? Because the structure's flaws were papered over by a boom in southern

Europe. The creation of the euro convinced investors that it was safe to lend

to countries like Greece and Spain that had previously been considered risky,

so money poured into these countries - mainly, by the way, to finance private

rather than public borrowing, with Greece the exception. And for a while everyone was

happy. In southern Europe, huge housing bubbles led to a surge in construction

employment, even as manufacturing became increasingly uncompetitive. Meanwhile,

the German economy, which had been languishing, perked up thanks to rapidly

rising exports to those bubble economies in the south. The euro, it seemed, was

working. I thank you Firozali

A.Mulla DBA

Firozali A.Mulla
Firozali A.Mulla

There is a phrase that USA

is so huge from the East to West that there is varying degree of everything in

the economy, rights, law, poverty, and if any care the answers is in the nets

and to be honest it is not at all good for the employed or unemployed. The

founders did not know the It, the space and believed in the moons an the stars.

In other words they are learning now what they had done. What is the electric

chair? They just hanged. Both killed or even the lethal injection. Today the

discussions are on the two sides of the issues and no one knows whether this

will work. The word is they are trying. A look at where Democratic President

Barack Obama and Republican presidential rival Mitt Romney stand on a selection

of issues: One Supports abortion rights. Health care law requires

contraceptives to be available for free for women enrolled in workplace health

plans, including access to morning-after pill, which does not terminate a

pregnancy but is considered tantamount to an abortion pill by some religious

conservatives. Supported requiring girls 16 and under to get a prescription for

the morning-after pill, available without a prescription for older women. The

other opposes abortion rights. Previously supported them. Says state law should

guide abortion rights, and Roe v. Wade should be reversed by a future Supreme

Court. But says Roe v. Wade is law of the land until that happens, and should

not be challenged by federal legislation seeking to overturn abortion rights

affirmed by that court decision. "So I would live within the law, within

the Constitution as I understand it, without creating a constitutional crisis.

But I do believe Roe v. Wade should be reversed to allow states to make that

decision." Said he would end federal aid to Planned Parenthood. Obama: A

fourth-straight year of trillion-dollar deficits is projected. Federal spending

is estimated at 23.5 percent of gross domestic product this year, up

from about 20 percent in previous administration, and is forecast to decline to

21.8 percent  by 2016. one approval to

raise debt limit to avoid default. One calls for tackling the debt with a mix

of spending cuts and revenue increases. Central to Obama's plan is to let

Bush-era tax cuts expire for couples making more than $250,000. That would

generate more than $700 billion over 10 years. Also, would set a 30 percent tax

rate on taxpayers making more than $1 million, increasing taxes for some but

not all millionaires and billionaires. That would generate about $47 billion

over 10 years. Reached agreement with congressional Republicans to cut $487 billion

in military spending over a decade. Romney: Defended 2008 bailout of financial

institutions as a necessary step to avoid the system's collapse, opposed the

bailout of General Motors and Chrysler and said any such aid should not single

out specific companies. Would cap federal spending at 20 percent of gross

domestic product by end of first term. Stayed silent on the debt-ceiling deal

during its negotiation, only announcing his opposition to the final agreement

shortly before lawmakers voted on it. Instead, endorsed GOP "cut, cap and

balance" bill that had no chance of enactment. Favours constitutional

balanced budget amendment. Proposes broad but largely unspecified cuts in

federal spending. Among the few details: 10 percent cut in federal workforce,

elimination of $1.6 billion in Amtrak subsidies and cuts of $600 million in

support for the arts and broadcasting. Obama: Term marked by high unemployment,

a deep recession that began in previous administration and officially ended

within six months, and gradual recovery with persistently high jobless rates.

Unemployment rate jumped to 8.3 percent from 7.8 percent in February 2009,

Obama's first full month in office, and has remained above 8 percent ever

since. The stretch of unemployment above 8 percent is the longest on record

dating to 1948. Unemployment hit a high water mark of 10 percent in October

2009. Of the 8.8 million jobs lost during the recession and its aftermath, 3.8

million have been regained. Businesses have added jobs for more than two years straight,

pushing down the unemployment rate from 9.8 percent in March 2010 to 8.2

percent and holding. Obama responded to the recession with a roughly $800

billion stimulus plan that nonpartisan Congressional Budget Office estimated

cut the unemployment rate by 0.7 to 1.8 percentage points. Continued

implementation of Wall Street and auto industry bailouts begun under George W.

Bush. Proposes tax breaks for U.S.

manufacturers

producing domestically or repatriating jobs from abroad, and tax penalties for

U.S. companies outsourcing jobs. Won approval of South Korea, Panama and

Colombia free-trade pacts begun under previous administration, completing the

biggest round of trade liberalization since the North American Free Trade

Agreement and other pacts of that era. In other words we have no idea who is

right ort who is wrong. This is from the interview by Donald Trump to the news.

The news is this time the election is very interesting this year. People are

scared I thank you Firozali A.Mulla DBA

Trajan Saldana
Trajan Saldana

"JPMorgan CEO Jamie Dimon defended his banks’ size – arguing that it helped it stay solvent during the worst times of the financial crisis" -- ????????????????????

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lolly52
lolly52

"Republican Representative Walter Jones and Democratic Rep. Carolyn Maloney reacted favorably to Weill’s comments, with Jones asking Treasury Secretary Tim Geithner in a hearing yesterday, “Isn’t it time we had a debate about the reinstatement of Glass-Steagall?’’yes!  YES!!  Bring back  Glass-Steagall.