Former Citigroup CEO: Break up the banks
Former CEO of Citigroup Sanford Weill delivers a speech during a news conference on the bank's 100th anniversary of operations in Japan.
Jeff Horwich: We found out four years ago that our biggest banks were too big to fail, but it's not like we've been doing anything to shrink them. In fact, 77 percent of the assets in the U.S. are with the biggest banks, and the guy who practically invented the idea of the megabank went on tv today to say it's time to break them up.
Our New York bureau chief Heidi Moore's with me live with more. Hello, Heidi.
Heidi Moore: Hi Jeff.
Horwich: So Heidi, you're big on Twitter and you're on Twitter this morning and this thing starts exploding. What's the big deal?
Moore: Yeah, absolutely. Well, the CEO who said this, or former CEO, was Sandy Weill, and so he used to head Citigroup, in fact he created Citigroup, and he also helped bring down a law known as Glass-Steagall, which kept apart banks that take deposits, banks that advise companies, and insurers. So he was the first one to really lobby against it, combine all of them, I mean he was the man who created the mega-bank as we know it. Then he goes on CNBC today and you hear something like this, his conversation with Becky Quick, the CNBC anchor:
Becky Quick: That's a pretty radical idea though, the idea of breaking up the investment banks and the banks, are you suggesting going back and really breaking these companies up?
Sandy Weill: Exactly what I'm suggesting.
Moore: So to everyone on Wall Street this was like invasion of the banker body snatchers. You know that Sandy Weill would say bygones and say that the banks are now too big to trust, that people don't want to invest with them anymore and that we have to break them up -- that's pretty big.
Horwich: So he says it, does that advance the cause of those who actually want to break up the big banks?
Moore: I think it does, only because there seems to be an impetus towards it. So John Reed was his co-CEO of Citigroup after the merger, he also disavowed the big bank model. Phil Purcell, who was the CEO of Morgan Stanley recently came out and said that he doesn't like that model either. So all these ex-CEO's, and mind you this doesn't affect their money any more, are coming out and saying this doesn't work. So we have to wait until after the election, but if Wall Street can break itself up from within like this, rather than congress trying to break it up from the outside, we're probably going to make some progress.
Horwich: Marketplace New York bureau chief Heidi Moore, thanks.
Moore: Thank you.