Oh LOOK who’s had a change of heart. Citibank ex-CEO Sandy Weill, architect of too big to fail and self-described shatterer of Glass Steagall, that’s who. Apparently — and it took him 40 years to realize this — it’s not a great idea to have unregulated behemoth financial institutions offering retail banking as well as investment banking because it puts the entire world’s economy at risk is bad for shareholders.
On Wednesday morning, the 79-year-old Weill, one of the 20th century’s most acquisitive bankers, stepped up to the mic to endorse … breaking up the banks. “What we should probably do is go split up investment banking from banking, have banks be deposit-takers, have banks make commercial loans and real estate loans, have banks do something that’s not going to risk the taxpayer dollars, that’s not too big to fail,” he remarked on CNBC…
The best way to make money now as a bank, he elaborated, is as a pure-play company that needn’t worry about how its consumer and proprietary units potentially run afoul of new regulations.
So it’s official, America: The “too big to fail” bank was both unfair and ultimately ineffective. Bailed-out 2012 Citigroup probably wouldn’t disagree, as it is in the throes of a painful deleveraging and suffering amid the widespread belief that it cannot be best of breed in any one line of business. Bank of America (BAC), which bought both Merrill Lynch and MBNA, is ruing the day it took on Countrywide’s mortgage morass. JPMorgan Chase (JPM), captained by onetime Weill protégé Jamie Dimon, is bigger than it’s ever been; accordion out its name and you’ll find Bank One, Bear Stearns, Providian, and Washington Mutual. But the place is now so unwieldy and too-big-to-manage that a trader known as the “London Whale” threatened to bring down the entire company.
Chopping these banking conglomerates into smaller, more focused, less systemically hazardous shops is a laudable goal. Thank you, Mr. Weill, for your courageous declaration. Why couldn’t you have made it a decade ago?
Ah why indeed. Probably because he was too busy destroying consumer protection legislation so he could become “baronially wealthy.” Or perhaps he was counting the billions from his golden parachute and sobbing about the loss of the corporate jet. But now — well, NOW times have changed. Back then, you could make money through destroying carefully crafted policies that had been in place for decades. These days, though, there may be clawbacks to executive pay. Protesters are showing up at meetings and causing a SCENE and it’s EMBARASSING. Shares have plummeted. And now there may be regulations, which as we know, are un-American. So the best way to solve this problem is to go on ahead and break up the banks to save the banks and restore shareholder profit to its glory days. And if it benefits the taxpayers too, well, that’s nice, but that’s not really the POINT, is it.