The problems with big banking, from back in the ’90s
Jeff Horwich: Last week we spent plenty of breath on Sandy Weill, the former head of Citigroup. Back in the ’90s, he fought for his and other banks to grow huge and complex. Then last week Weill goes on TV and says: “It’s time to break up the big banks.”
This inspired Allan Sloan, Fortune’s senior editor-at-large, to do a bit of time-traveling. Hello, Allan.
Allan Sloan: Good morning Jeff.
Horwich: We are so often talking about your latest column but today you’re going to take us way back to your very first column for Newsweek — some 17, 18 years ago. What did you have to say?
Sloan: Well in March of 1995, I wrote that repealing the Glass-Steagall Act, which separated investment banking from commercial banking, was a terrible idea and we shouldn’t do it.
Horwich: An ultimately that did happen in 1999?
Sloan: That’s right and it that begat Citigroup — which hasn’t been a success — and begat all sorts of other problems.
Horwich: And what were the fears that you articulated in 1995?
Sloan: That combining these companies would combine two different businesses and nobody knew how to manage one of them let alone two of them and these things would become big, enormous, sprawling. And this week I think I’m going to take the victory run, in the journalistic Olympics, if I can find enough laurel leaves.
Horwich: Just to elaborate a bit, on the things that were going on in 1995, it could be ripped from today’s headlines.
Sloan: It was all the same stuff, but the numbers were smaller and the names were different. But, you know, if you change the names it would be exactly what’s going on now.
Horwich: So Sandy Weill, the former CEO of Citigroup, was one of those people who took full advantage of the repeal of Glass-Steagall and now he says the banks should be broken up. Do you feel vindicated? Do you think he finally just picked up your column and read it?
Sloan: Well, considering he is the major reason Glass-Steagall was repealed it’s possible that he came late to righteousness. It’s not because of me but if you like I’ll happily take credit.
Horwich: Why do you think it was?
Sloan: I think it was because he’s a reasonably intellectually honest guy, it’s getting near the end of – you know his time – and has a regret and wanted to express it.
Horwich: Allan Sloan, Fortune’s senior editor-at-large. Thanks Alan.
Sloan: My pleasure Jeff.
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