Robert Reich and Sandy Weill
From Robert Reich on Sandy Weill:
If any single person is responsible for Wall Street banks becoming too big to fail it’s Sandy Weill. In 1998 he created the financial powerhouse Citigroup by combining Traveler’s Insurance and Citibank. To cash in on the combination, Weill then successfully lobbied the Clinton administration to repeal the Glass-Steagall Act – the Depression-era law that separated commercial from investment banking. And he hired my former colleague Bob Rubin, then Clinton’s Secretary of the Treasury, to oversee his new empire.
Weill created the business model that Wall Street uses to this day — unleashing traders to make big, risky bets with other peoples’ money that deliver gigantic bonuses when they turn out well and cost taxpayers dearly when they don’t. And Weill made a fortune – as did all the other executives and traders. JPMorgan and Bank of America soon followed Weill’s example with their own mega-deals, and their bonus pools exploded as well.
Citigroup was bailed out in 2008, as was much of the rest of the Street, but that didn’t alter the business model in any fundamental way. The Street neutered the Dodd-Frank act that was supposed to stop the gambling. JPMorgan, headed by one of Weill’s protégés, Jamie Dimon, just lost $5.8 billion on some risky bets. Dimon continues to claim that giant banks like his can be managed so as to avoid any risk to taxpayers.
Sandy Weill has finally seen the light. It’s a bit late in the day, but, hey, he’s already cashed in. You and I and millions of others in the United States and elsewhere around the world are still paying the price.
What’s the betting that one of the presidential candidates will take up Weill’s proposal?
(I also wonder who will be shorting said banks if Weill’s words do not just disappear into the void)
I am going to disagree on the thoughts of Sandy being the creator. The actions leading to the demise of Glass-Steagall happened well before the combining of Citi with Travelers.
Greenspan takes the brunt of the blame for TBTF, the lax regulation of the derivatives market, and the demise of Glass-Stegall over Sandy. It is his actions which laid the foundation for 2008. Section 20 which regulates the amount of gross profits which can be invested by banks was increased periodically by The Fed under Greenspan. When Born moved to regulate the instruments of destructions, derivatives; the CFTC was blocked by Greenspan through Summers, Levitt, and Gramm in Congress.
While Weill dreamed of the combining of banks and trading firms, he was blocked early on until Greenspan laid that very foundation at which time he could go to Clinton. No one else could do this with the exception of Congress. As it was the National Bank Act had to be altered to allow this to take place also.
As far as Weill saying “I am sorry?” It rings hollow as hollow as McNamara apologizing for Vietnam while he sells his book.
“We were wrong, terribly wrong. We owe it to future generations to explain why.” — McNamara
Good friends perished because of stupidity in the sixties and seventies while in 2008 many people lost their futures because of the crash. With a knowledge of what he was doing, Greenspan laid the foundation for 2008 and Weill built a model of TBTF. Both McNamar and Weill escaped with their livelihood and selves intact leaving the rest of us the mess to clean up.
I did not accept McNamara’s apology and I sure as hell am not going to accept Weill’s. If anything Sandy, give back the money you made or start fixing the mortgages of people whose lives were ruined.
Really good comment, run. Just want to add, for readers who don’t know, that Born is Brooksley Born, who headed the Commodity Futures Trading Commission during the mid and late ‘90s. From what I can tell (although I’m definitely no expert on this subject), the CFCT is the only U.S. financial-markets regulatory agency that has actually done proper oversight of the markets it’s charged with regulating in the last two decades.
And that was only after the agency recovered from Wendy Gramm–which, in all honesty, it still hasn’t.
I may be wrong, but I’ll make my usual $20-your-favorite-charity-against-mine bet that Sandy Weill has been saying something like that for at least a year, and iirc much longer.
The “news” is that every time he says it, reporters treat it as if it were the first time.
This information is great, however we still have done nothing regarding regulating the finical markets,except having a watered down Dodd-Frank Bill.We are moving in the direction of 2007 and Banks are bigger than ever.