This morning on CNBC’s Squawk Box, Sandy Weill made a truly shocking remark. If you don’t know Sandy, he built Citi into the financial conglomerate it is today, putting together my old employer Shearson Lehman, Smith Barney, Primerica, Travelers and many, many more financial companies. Sandy was supposed to be the heir apparent at AMEX when Shearson was called Shearson/American Express, but massive egos got in the way in the roaring 1980s.
One of the many causes of the 2007 – 2009 financial crisis was that the post Great Depression law, Glass Steagall, was repealed in 1999 by Congress and the president. That allowed banks to get back into the brokerage and investment banking areas, which sounds fine on the surface. It also permitted them to create those esoteric alphabet soup of private products like CMOs, CLOs, CDOs, SIVs, etc., which not only could be leveraged, but also held on the banks’ balance sheets. Remember when the daily discussion centered around the massive amount of write downs first with sub prime loans, then alt A loans and finally prime loans? These loans were all packaged up in the alphabet soup products!
Anyway, one of the chief architects and proponents of repealing Glass-Steagall was none other than Sandy Weill himself! He actually hired former Clinton administration Treasury chief Robert Rubin as Vice Chairman of Citi to begin the “lobbying” process of Congress.
Very “interesting” that after the capitalist system almost ceased to exist, the man behind a key enabler has done a 180. Mea culpa?