Major Bankster Says that Big Banks Need to be Broken Up
The man who helped usher in the area of multipurpose financial firms says that big banks in the United States should be broken up to protect taxpayers.
As CEO of financial services company Travelers Group, Sanford “Sandy” Weill negotiated a $76 billion merger with Citicorp, formerly the City Bank of New York, in 1998—an action apparently in direct violation of the New Deal-era Glass-Steagall Act. The challenge led to a repeal of the law, which former president Bill Clinton signed saying, “[t]he world is very different.”
Apparently Weill believes it’s a different world once again. In an CNBC interview, Weill, 79, was frank: “What we should probably do is go and split up investment banking from banking…Have banks do something that’s not going to risk the taxpayer dollars, that’s not going to be too big to fail.”
“We can have size and scale but it doesn’t have to be connected to a deposit-taking institution,” Weill continued. “Have banks be deposit-takers, have banks make commercial loans and real estate loans.”
Weill says he hasn’t spoken to current Citigroup CEO Vikram Pandit about his change of heart. Jamie Dimon, Chairman, President, and CEO of JPMorgan Chase, is a former protégé of Weill’s; so far, he hasn’t spoken to him either. The division of investment banking and retail banking has long been a tenet of the structure of financial institutions. The risks taken by each arm of a bank can be very different, and consumers who put their savings into banks are not asking for the kinds of risks that are present on the investment banking side of the company.
Consumers have been forced to pay for massive bailouts of banks that have taken extraordinary risks with their money and failed on those risks. When the investments go well, the banks make billions and executives earn large bonuses. But when the investments do not go well, the firms utilize taxpayer bailouts to protect them from the consequences. This has led to the angst of many consumers across America.
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