Yesterday Sandy Weill, former head of Citigroup and one of the people most primarily responsible for the repeal of Glass-Steagall and the rise of Too Big To Fail banks, came out in favor of breaking up big banks and separating investment banking from commercial banking. As a result, the world of finance has been knocked off its rocker. This is quite a big deal.
I wonder if part of the reason Weill has come out against himself (basically) is that though there have been no meaningful reforms or regulations put in place after Wall Street trashed the American economy in 2008 (and has kept us wrecked since then), there has been a marked rise in awareness that bankers are to blame. Being a banker is not quite the honorable profession it once was.
Jason Linkins at Huffington Post, writing on Neil Barofsky’s new book and a bad review of it by Jackie Calmes (the review was in itself bad in its inaccurate and lazy panning of Barofsky’s book), makes this observation:
If you’re living in America, and you can’t figure out why “Wall Street turned so hostile to President Obama’s re-election,” then you haven’t been paying sufficient attention. In the first place, people on Wall Street have made it pretty clear that their major beef with Obama is that he refuses to characterize them as all-knowing, all-wise, fully redeemed individuals. Instead, he has been critical of the role they played in the financial crisis. And that’s what hacks them off. As Jamelle Bouie of the American Prospect observes: “By criticizing Wall Street–and placing some blame for the crisis on their shoulders–Obama is diminishing the psychic rewards of working in the financial sector. People respect bankers far less than they did in the past, and that’s what Wall Street is reacting against.”
This could point to some of the reason Weill is getting on the regulation bandwagon now: he’s recognizing that he and his kind aren’t thought of highly and he doesn’t like that feeling.
Of course, while Weill’s comments are good in their validation of what lots of people have been saying for years, Yves Smith notes that it’s all a bit too easy for Weill to say these things now:
When I see someone like Weill or Dick Parsons putting a big chunk of their ill-gotten gains to fund lobbying or a think tank promoting tough-minded financial services reform, I’ll give the backers their due for making a sincere and serious effort to undo the considerable damage they have done. But absent that, this career death-bed conversion is a hollow and insulting gesture.
Nonetheless, Weill’s comments offer an opportunity to push breaking up the TBTF banks. If there were a major political party which supported this move, it might happen. But there isn’t, so it won’t.