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Sandy Weill: Break Up the Banks
 

Edmundo Braverman's picture
ST
(Human, 14,373
 
Points)
 on 7/26/12 at 7:30am
Weill.jpg

So the big news yesterday was that Sandy Weill, former Citigroup CEO and slayer of Glass-Steagall, called for the break-up of the Too Big To Fail banks. Take a moment to savor the rare irony in that notion. The guy who more or less created the monster is now calling for its destruction. Is he atoning for his sins and finally looking out for the little guy?

Ummmm...not so much.

His rationale is that smaller banks run leaner and therefore pay their executives better bonuses. He didn't say that, exactly. But if you read between the lines, it's pretty obvious:

Weill said that by breaking up banks, they would be “much” more profitable.

"This is what all the regional banks do and everybody says buy regional banks,” he said. “They'll just be bigger regional banks.”

Interestingly enough, legendary bank analyst Mike Mayo thinks the proposed break-ups could be a huge boon for investors, specifically Morgan Stanley shareholders. At the same time he was calling bullshit on Weill's hypocrisy, he said Morgan Stanley's break-up value was $32 a share (the stock is currently $13) and that MS short sellers would get "blown to Neptune" if a break-up were announced. That's some food for thought right there.

Does anyone doubt that breaking up the banks would be a good thing for the US economy? I'd like to hear the arguments against it, because I'm having a hard time coming up with one. Repealing Glass-Steagall was a 100 year storm-level fuck up, and the tsunami it caused destroyed the entire planet's financial system in less than a decade.

Maybe it's time to close those floodgates again. Ya think?

Tags:

Comments

Relinquis's picture

i'm expecting WSO guys to

RE
(Neanderthal, 2,186
 
Points)
 on 7/26/12 at 7:50am

i'm expecting WSO guys to start calling Sandy Weill a socialist...

relinquis... Killing the GMAT this December; Over/Under set at: 725 GMATs.

sanjose04's picture

I think these comments from

IB
(Orangutan, 335
 
Points)
 on 7/26/12 at 8:04am

I think these comments from former executives are useless in that it will have no influence.

But I do seriously believe that deposit-taking firms should not be allowed to trade with their own capital.

And one thing we should be careful about when discussing this matter is that the real problem lies in what sorts of activities the firms are engaging in, rather than the size. The reason why big firms are being hammered by the public and regulators is because it usually is the case that these firms happen to do all the perceived bad things, such as selling insurance against default, trading with their own capital, etc.

That being said, I actually think banks that only do traditional things, such as lending to corporations
, taking deposits, setting up ATMs etc., can benefit from their size if they are willing to expand overseas.

West Coast rainmaker's picture

Come on, it's Sandy Weill. I

ER
(Neanderthal, 2,072
 
Points)
 on 7/26/12 at 8:25am

Come on, it's Sandy Weill. I actually laughed when I saw this yesterday. Although Glass Steagall was being circumvented abroad, he's the guy who officially opened the floodgates.

In other news, Bill Gates calls technology evil, and Jack Welch declares that internal management training is useless. Sandy Weill wishing for smaller banks strains belief.

Addinator's picture

Edmundo Braverman: So the big

ST
 
Points)
 on 7/26/12 at 8:48am
Edmundo Braverman:

So the big news yesterday was that Sandy Weill, former Citigroup CEO and slayer of Glass-Steagall, called for the break-up of the Too Big To Fail banks. Take a moment to savor the rare irony in that notion. The guy who more or less created the monster is now calling for its destruction. Is he atoning for his sins and finally looking out for the little guy?

Ummmm...not so much.

His rationale is that smaller banks run leaner and therefore pay their executives better bonuses. He didn't say that, exactly. But if you read between the lines, it's pretty obvious:

Weill said that by breaking up banks, they would be “much” more profitable.

"This is what all the regional banks do and everybody says buy regional banks,” he said. “They'll just be bigger regional banks.”

Interestingly enough, legendary bank analyst Mike Mayo thinks the proposed break-ups could be a huge boon for investors, specifically Morgan Stanley shareholders. At the same time he was calling bullshit on Weill's hypocrisy, he said Morgan Stanley's break-up value was $32 a share (the stock is currently $13) and that MS short sellers would get "blown to Neptune" if a break-up were announced. That's some food for thought right there.

Does anyone doubt that breaking up the banks would be a good thing for the US economy? I'd like to hear the arguments against it, because I'm having a hard time coming up with one. Repealing Glass-Steagall was a 100 year storm-level fuck up, and the tsunami it caused destroyed the entire planet's financial system in less than a decade.

Maybe it's time to close those floodgates again. Ya think?

First off, Sandy of all people calling to break up the banks is hilarious considering he helped break the mold. I think , however, there is something to the fact that he of all people is realized what a cluster it has become. The only arguments I've heard for it are that now foreign banks will have a competitive edge and the United States will lose it's financial dominance throughout the world if our banks are put at a competitive disadvantage against foreign institutions. I'm not quite sure I buy that whatsoever and that seems like more of a standard line repeated by lobbyists. I for the life of me can't understand why banks don't like this. I get it from a perspective of oh, we hate regulations, as I hate regulations. But really, why stay massive but get neutered in the process when you could break up and do whatever it is you want to do again.

San Jose, I actually disagree with you on that one. I think the issue is totally size. If I have a couple million and am engaging in all sorts of CDS swaps and exotic instruments and I blow up, no one cares. It hurts myself and whoever invested in me. Done and done. When I lever that up and go to 500 million it still doesn't hurt that much. When you start talking about doing it with hundreds of billions, even trillions and having deposited capital underneath it that is publicly insured and could be affected if I take on too many derivatives bets, that is when it becomes a problem. Increase that to trillions and you get my point. Scale is everything when it comes to systematic risk. Thus, the bigger you are the more scrutiny you get on your activities.

Contact: [email protected]
See my other blog posts

JimmyDnFFX's picture

Typically those who rail the

O
(Baboon, 137
 
Points)
 on 7/26/12 at 8:59am

Typically those who rail the most stand to lose the most. Usually it starts out with "we need to be careful..." and ends with "...and then the gravy train just came to a halt."

Glass Steagall shouldn't have been repealed in the first place. This is yet another one of Alan Greenspan's legacies of laissez faire policy gone wrong. Then again, how tough was it to believe he didn't see subprime coming? I mean, have you seen those glasses Mr. Magoo is wearing?

Just because it's ironic, doesn't mean it doesn't need to be done. JPM anyone....? Just sayin...

80% of life is just showing up

-Woody Allen-

UFOinsider's picture

Sandy Weill : banking ideas

O
(Human, 10,347
 
Points)
 on 7/26/12 at 9:26am

Sandy Weill : banking ideas :: Newt Gingrich : politics

Next, is Mike Tyson giving a seminar on sexual harassment? Will Newt Gingrich detail his adultery while he pursues an adultery inquiry? Can we get an AMEN from Christopher Hitchens? Dude made a career and a fortune fucking A LOT of people over, I mean a lot, this was a systemic mistake....now we're supposed to want to hear from him at all?

We've seen two models:
(1) G/S seperated banks, decades of relative stability
(2) universal bank era, total collapse, gov't receivership of entire financial industry

So y'all tell me. Results speak for themselves. Typical fucking boomer "I got mine, fuck you. Oh, and BTW, here's some good ideas that I fought against". We're way beyond atoning for past misdeeds and cleaning up a legacy: Sandy, please, KILL YOUR SELF

YOU JUST GOT TROLLED
http://www.troll.me/images/red-foreman322/dont-you...

keensetofpeepers's picture

I got mine

(Baboon, 147
 
Points)
 on 7/26/12 at 9:16am

I got mine

JimmyDnFFX's picture

As Ray Liotta said in

O
(Baboon, 137
 
Points)
 on 7/26/12 at 9:17am

As Ray Liotta said in Goodfellas, "Oh...business is bad? Fuck you! Pay me!"

80% of life is just showing up

-Woody Allen-

Onetwobit's picture

Either looking to profit, or

CF
(Orangutan, 255
 
Points)
 on 7/26/12 at 9:43am

Either looking to profit, or looking for last minute redemption.

Kind of doubt the latter.

Grayson's picture

I just saw the swing PIMCO

IA
(Monkey, 62
 
Points)
 on 7/26/12 at 9:56am

I just saw the swing PIMCO took at Sandy on DealBreaker, fantastic.

http://dealbreaker.com/2012/07/oh-no-you-diint/

"He chose money over power, a mistake nearly everyone makes. Money is the Mcmansion in Sarasota that starts falling apart after 10 years. Power is the old stone building that stands for centuries. I cannot respect someone who doesn't see the difference."

UFOinsider's picture

Grayson: I just saw the swing

O
(Human, 10,347
 
Points)
 on 7/26/12 at 10:00am
Grayson:

I just saw the swing PIMCO took at Sandy on DealBreaker, fantastic.

http://dealbreaker.com/2012/07/oh-no-you-diint/

Loving the comments.

Seriously, Bess Levin would be an awesome guest here....whaddya think Eddie?

YOU JUST GOT TROLLED
http://www.troll.me/images/red-foreman322/dont-you...

TheKing's picture

Mike Mayo is the fucking man.

O
 
Points)
 on 7/26/12 at 10:29am

Mike Mayo is the fucking man. "Blown to Neptune" made me laugh out loud.

Sandy Weill, on the other hand, can eat a dick. I'm glad he's calling for it because it's tough to ignore the Father of TBTF, but he's still a dickhead for calling for this after he made a mint and helped destroy the global economy.

I've said it time and time again, there are no legitimate arguments against bringing back Glass Steagall. None.

Check out my WSO Blog

Abdel's picture

Ron Paul addressed this on

O
(Neanderthal, 2,064
 
Points)
 on 7/26/12 at 10:41am

Ron Paul addressed this on Bloomberg yesterday.

http://www.youtube.com/watch?v=y7ST35eXM4w at the 2:00 mark

TheKing's picture

Abdel: Ron Paul addressed

O
 
Points)
 on 7/26/12 at 10:50am
Abdel:

Ron Paul addressed this on Bloomberg yesterday.

http://www.youtube.com/watch?v=y7ST35eXM4w at the 2:00 mark

Ron Paul is one of the few people that gets it.

With that said, the moral hazard can't be removed without bringing back Glass Steagall. The gov't and the Fed will simply NOT let the banks fail. If shit hit the fan again, I really do not believe that the Congress, President, and Fed would let the banks fail. They just won't do it. And that is why we need Glass Steagall. Because we won't let them fail, we need rules to stop TBTF banks from existing.

Check out my WSO Blog

Thurnis Haley's picture

Abdel: Ron Paul addressed

(Orangutan, 367
 
Points)
 on 7/26/12 at 11:55am
Abdel:

Ron Paul addressed this on Bloomberg yesterday.

http://www.youtube.com/watch?v=y7ST35eXM4w at the 2:00 mark

That's really surprising that Ron Paul voted against repealing G-S.

Frieds's picture

I find this funny Eddie

AM
(Neanderthal, 2,530
 
Points)
 on 7/26/12 at 12:26pm
ssmaclac's picture

I love listening to Ron Paul.

(Monkey, 37
 
Points)
 on 7/26/12 at 12:41pm
TraderDaily's picture

Well, Phil Purcell, former

(King Kong, 1,045
 
Points)
 on 7/26/12 at 1:06pm
UFOinsider's picture

ssmaclac: I love listening to

O
(Human, 10,347
 
Points)
 on 7/26/12 at 1:06pm

YOU JUST GOT TROLLED
http://www.troll.me/images/red-foreman322/dont-you...

TheKing's picture

UFOinsider: ssmaclac: I

O
 
Points)
 on 7/26/12 at 2:36pm

Check out my WSO Blog

GS's picture

Ah ... Citi. The bank that

ST
 
Points)
 on 7/26/12 at 5:24pm
andres17's picture

ssmaclac, I think his

 
Points)
 on 7/26/12 at 6:35pm
ssmaclac's picture

andres17: ssmaclac, I think

(Monkey, 37
 
Points)
 on 7/26/12 at 6:58pm
whatwhatwhat's picture

haha, old school salomon guys

HF
(King Kong, 1,400
 
Points)
 on 7/26/12 at 7:11pm
andres17's picture

I guess you can make that

 
Points)
 on 7/26/12 at 7:52pm
andres17's picture

I guess you can make that

 
Points)
 on 7/26/12 at 7:52pm
solb22's picture

A fragmented banking system

 
Points)
 on 7/26/12 at 7:53pm
andres17's picture

It is not about "fragmenting"

 
Points)
 on 7/26/12 at 8:30pm
solb22's picture

I was under the impression

 
Points)
 on 7/26/12 at 8:42pm
Edmundo Braverman's picture

whatwhatwhat: haha, old

ST
(Human, 14,373
 
Points)
 on 7/27/12 at 10:37am

TraderDaily's picture

Mixing investment banking and

(King Kong, 1,045
 
Points)
 on 7/29/12 at 12:55pm

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