Posted by AzBlueMeanie:
In case you missed this earlier this week, Former Citigroup Chairman & CEO Sanford I. Weill, the man who invented the financial supermarket, called for the breakup of big banks in an interview on CNBC Wednesday. Wall Street Legend Sandy Weill: Break Up the Big Banks:
“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, have banks do something that’s not going to risk the taxpayer dollars, that’s not too big to fail,” Weill told CNBC’s “Squawk Box.”
He added: “If they want to hedge what they’re doing with their investments, let them do it in a way that’s going to be mark-to-market so they’re never going to be hit.”
He essentially called for the return of the Glass–Steagall Act, which imposed banking reforms that split banks from other financial institutions such as insurance companies.
“I’m suggesting that they be broken up so that the taxpayer will never be at risk, the depositors won’t be at risk, the leverage of the banks will be something reasonable, and the investment banks can do trading, they’re not subject to a Volker rule (the Volcker rule explained), they can make some mistakes, but they’ll have everything that clears with each other every single night so they can be mark-to-market,” Weill said.
He said banks should be split off entirely from investment banks, and they should operate with a leverage ratio of 12 times to 15 times of what they have on their balance sheets. Banks should also be completely transparent, Weill said, with everything on balance sheet. “There should be no such thing as off balance sheet,” he said.
If banks hedge in any way, Weill added, positions should be mark-to-market (mark-to-market explained) and cleared through an exchange.
Weill said that by breaking up banks, they would be “much” more profitable.
Weill said the model he built at Citi was “right for that time.” But “the world changed with the collapse of the housing market and the real-estate bubble … so I don’t think it’s right anymore.”
Wow. The guy who threatened to blow up our financial system back in the 1990s with his Citibank financial services mega-mergers unless Congress agreed to financial services deregulation to make it all legal (his Citibank deals were approved by regulators leading the way to financial services deregulation in Congress), now says it was a bad idea, so sorry, let's go back to the Glass-Steagall Act. As Jon Stewart said of Sanford Weill in a recent segment, what an A-hole.
The former sheriff of Wall Street, Eliot Spitzer, had a good take on Weill's sudden conversion. Eliot Spitzer suggests Romney follow Sandy Weill's lead - Current TV:
[Sanford Weill] finally got it right — but he is still to blame for one of the most damaging policy shifts in our entire economic history.
Here are a couple of crucial lessons we should all agree on: The so-called synergies that Weill and others claimed would result from merging commercial banking and investment banking often ended up being little more than the triumph of fraud and avarice over allegiance to truth-telling and fiduciary duty. The notion of self-regulation is a pure canard — it was, and is, no more than license to steal and cover for corruption.
But what to make of the few who remain steadfast in their dedication to the now almost universally acknowledged broken system of self-regulation and big banks? Like Mitt Romney, whose only answer to reforming financial services is to repeal Dodd-Frank and then let the chips fall where they may?
It’s hard not to conclude that, when it comes to financial services, Mitt Romney is about where he is on most other matters: wandering aimlessly with the ability to do little more than repeat the broken mantras of the distant past. He has shown not a moment of originality, independence, reflection or leadership in this entire campaign.
Instead, his is a spineless voice for the tired, failed answers that are now even rejected by his former friends. Isn’t Mitt feeling just a little bit lonely out there?