From an editorial published in the New York Times on Friday:
Sometimes, in a great national debate, the most powerful voices can be those of the converted. Add to the list Sanford Weill, the financier who led the charge for the repeal of the 1933 law that separated commercial banks from investment banks. He says that banks have grown too large, that they may need to be broken up a bit and that separation should be restored.
In the late 1990s, Weill used the repeal of the Glass-Steagall Act to help usher in an era of huge firms epitomized by his own Citigroup that brought trading, mergers and acquisitions, commercial lending and other banking services under one roof. Banks became bigger and bigger and their banking and trading arms more intertwined. It was the start of sharp deregulation of the financial industry.
Some expressed alarm about having banks, driven by huge profits and bonuses, bet the money of their depositors on new, opaque and risky investment instruments. But the idea that the industry did better without regulation was entrenched in the political debate. It was not until the 2008 financial crisis that Americans woke up to the threat posed by banks so big that their failure could destroy the financial system and the economy.
Appearing Wednesday on CNBC, Weill surprised everyone by announcing that the wall should be rebuilt between a banks deposit-taking operations and its risky trading businesses. What we should probably do is go and split up investment banking from banking, he said. Have banks do something thats not going to risk the taxpayer dollars.
We should note that his position is driven primarily by his belief that rebuilding that wall would make banks more profitable. He also says that he does not regret the Glass-Steagall repeal, which he thinks was the right thing to do at the time.
But the important thing is that the architect of the megabank has stepped forward and called for sensible financial regulation much in the same way that Warren Buffett shook things up by calling for tax increases on the most wealthy Americans.
Views in U.S. Opinions are not necessarily those of the Observers editorial board.
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