Sandy Weill is calling for the banks to be broken up. Bloomberg reports:
Sanford “Sandy” Weill, whose creation of Citigroup Inc. (C) ushered in the era of U.S. banking conglomerates a decade before the financial crisis, said it’s time to break up the largest banks to avoid more bailouts.
“What we should probably do is go and split up investment banking from banking,” Weill, 79, said yesterday in a CNBC interview. “Have banks do something that’s not going to risk the taxpayer dollars, that’s not going to be too big to fail.”
Weill helped engineer the 1998 merger of Travelers Group Inc. and Citicorp, a deal that required repeal of the Depression-era Glass-Steagall law that forced deposit-taking companies backed by government insurance to be separate from investment banks. The New York-based company became the biggest lender in the world before taking a $45 billion taxpayer bailout in 2008 to avoid collapse.
Weill joins regulators, investors, analysts, former bankers and lawmakers in calling for the break-up of too-big-to-fail banks to unlock shareholder value and prevent another financial crisis.
America needs to break up its biggest banks, but not for reasons likely to give a tingle to Occupy Wall Street’s remnant rabble (or its Great Everywhere Spirit, Senate candidate Elizabeth Warren of Massachusetts). This isn’t about some political exercise in election-year demonization. Bankers, as a class, aren’t villains. They’re not “banksters” grifting money from middle-income pockets. And they’re certainly not vampire squids on the collective face of humanity, as Rolling Stonewriter Matt Taibbi has infamously described Goldman Sachs. And while it might be rhetorical overkill to say they’re “doing God’s work,” as Goldman boss Lloyd Blankfein has put it, bankers do fulfill a critical economic function. Bankers, not bureaucrats, are supposed to be the efficient allocators of capital in America’s market-based economy. They connect people who have spare dough to those who need a bit of spare dough, such as entrepreneurs looking to start a business or companies looking to grow one. We need lots of successful banks, and we need smart folks to run them.
[T]here is the not-so-small matter of the structure of the financial sector. Romney must know better than anyone that the folks running our big banks, including Obama’s favorite banker Jamie Dimon, are hardly paragons of risk assessment. After all, Bain Capital, where Romney made his fortune, existed in part because -worthy businesses often could not borrow on attractive terms from traditional banks. He must know two other things about these banks: They are too big to fail, and too complicated to regulate. So where is he when economists say that the better alternative is not more of the failed policies of the Obama years—regulating the unregulatable, bailing out when all else fails —but breaking up the big banks? Not for vulgar populist reasons, but to improve the functioning of the capital markets. If so inclined, he could toss in a fairness argument to top off the economic efficiency point.