Repeal of Glass-Steagall Act in 1999 Allowed the Big Banks to Create the Financial Crisis

Former Citicorp CEO John Reed apologized in 2009 for his role in building Citigroup and said banks that big should be divided into separate parts. Weill said today he altered his view about the industry because “the world changes.” He has been thinking about it a lot over the last year, he said. “The world we live in now is not the world we lived in 10 years ago,” Weill said. “Good things are simple.” Former President Bill Clinton said when he signed the repeal of Glass-Steagall in 1999 that it was “no longer appropriate” for the economy. “The world is very different,” Clinton said at a White House signing ceremony. [Source]

Ex-Citigroup CEO Sandy Weill: ‘Split up’ the big banks

July 25, 2012

The Ticket - In a remarkable policy shift, former Citigroup chairman and chief executive Sandy Weill now thinks that Wall Street should break up its big banks in an effort to regain the public's trust.

"What we should probably do is go and split up investment banking from banking," Weill said on CNBC's "Squawk Box" on Wednesday. "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."

"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," he said.

Weill essentially called for the return of the Glass-Steagall Act, CNBC said. The 1933 Depression-era legislation separated investment and commercial banking activities in the wake of the 1929 stock market crash and commercial bank failure, according to Investopedia. It was repealed in 1999 during the Clinton administration.

Weill was one of the architects of the Gramm-Leach-Bliley Act, which helped repeal Glass-Steagall. (In his former office, Weill proudly displayed a large wooden sign with the words "The Shatterer of Glass-Steagall" etched into it.)

The 79-year-old Wall Street legend also called for complete transparency in the banking industry.

"There should be no such thing as off balance sheet," he said. "I want to see us be a leader, and what we're doing now is not going to make us a leader."

The Hypocrites Who Wrecked American Finance

July 25, 2012

Philly.com - Sandy Weill, who paid himself hundreds of millions of dollars as a reward for persuading President Clinton and the Republican-led U.S. Senate and Federal Reserve to retroactively bless his acquisition of Citibank by his Travelers insurance and high-risk loan conglomerate, now says the policy was a mistake.

“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 said this morning on CNBC’s “Squawk Box.”

Highlights:

"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," and which Clinton, aides Larry Summers and Robert Rubin (later a Citi executive), Fed head Alan Greenspan, U.S. Sen Phil Gramm and others endorsed after lobbying by Weill and his banking allies.

“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" breaking up hybrid giant banks. "They can make some mistakes, but they’ll have everything that clears with each other every single night so they can be market-to-market,” Weill told CNBC.

Banks "should be split off entirely from investment banks, he added. That would make them "much” more profitable, he said, citing the example of "regional banks" (like PNC, Citizens, TD).

Weill's top collaborators have also recanted, notes Bloomberg here: "Richard Parsons," the ex-TimeWarner boss "who earlier this year ended a 16-year tenure on the board of Citigroup, said in April that the 1999 repeal of the Glass-Steagall law made the business more complicated and ultimately helped cause the financial crisis.

"Former Citicorp CEO John Reed," who cut the Weill merger deal in the first place, "apologized in 2009 for his role in building Citigroup and said banks that big should be divided into separate parts."

Gotta hand it to them for admitting policies that were so profitable for them personally are evil for American finance.

But none of them, so far as we have heard, are promising to give back the fortunes they cashed in from Citigroup stock grants before the 2008 blow-up that proved the bankruptcy of the Weill business model and the failure of Clinton, Gramm, Greenspan, Summers and Rubin to protect Americans from the government-financial complex.

Shareholders, taxpayers, borrowers and laid-off staff paid to make these power-lobbying bankers rich. No penalty? No shame?