In his Telegraph
column, Liam Halligan observes that banking scandals are going to continue to occur until Sandy Weill's simple fix for the financial system, restoring Glass-Steagall and requiring ultra transparency, is implemented.
That was the recent volte-face by Sanford Weill, the swaggering Wall Street financier who, in the late 1990s, forged the merger of Travellers' Insurance and Citibank. In creating the mighty Citigroup, Weill consigned to history the Glass-Steagall Act - the Depression-era separation of commercial and investment banking.
For a very long time, this column has argued that the 1999 repeal of Glass-Steagall was the single most important cause of the sub-prime crisis and its related economic fall-out. Sanford Weill, the man who did more than anyone to remove this crucial safeguard, is now admitting he was wrong.
"We should probably now split up investment banking from banking," Weill said on US television, in an eve-of-Olympics confession. "Have banks be deposit-takers, make commercial and real estate loans do something that's not going to risk the taxpayer dollars, that's not too big to fail."
For Weill to say this is like Colonel Sanders calling for chicken-free diets.
Equally incredibly, Weill also called for "full disclosure", criticising investment banks' use of off-balance-sheet subsidiaries – a black art in which Citigroup excelled.
Why this conversion in Weill, which has bolstered the case for bank reforms going well beyond America's Dodd-Frank measures or the UK's Vickers proposals?
As shown by the Citigroup share price, now just a tenth of its 1999 level, most of the banking behemoths are now probably worth more broken up. And having made his massive fortune and now approaching his 80s, Weill is tidying up his memoirs.
But still, both Weill and John Reed, the two Citigroup founders, now both back a new Glass-Steagall.
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