Retired head of Citigroup John Reed seems to have some misgivings about the repeal of the Glass-Steagall Act of 1932, which his company lobbied to kill in the first place.
In a New York Times letter-to-the-editor, Reed writes:
“Re “Volcker’s Voice, Often Heeded, Fails to Sell a Bank Strategy” (front page, Oct. 21):
As another older banker and one who has experienced both the pre- and post-Glass-Steagall world, I would agree with Paul A. Volcker (and also Mervyn King, governor of the Bank of England) that some kind of separation between institutions that deal primarily in the capital markets and those involved in more traditional deposit-taking and working-capital finance makes sense.
This, in conjunction with more demanding capital requirements, would go a long way toward building a more robust financial sector.
John S. Reed
New York, Oct. 21, 2009
It’s a bit of an ironic epistle considering Glass-Steagall’s dissipation made possible the merger between Citicorp and Citibank with Travelers Group, combining commercial banking with investment banking and insurance, and facilitating the sub-prime bubble and eventual collapse.
To be fair, Reed was ousted in a boardroom coup before the really bad stuff started to happen, as he would have been an impediment to it, but he’s still invited the vampire into the house.
For more on Glass-Steagall’s role in ushering in the Great Recession, check out our post “Blame The Subprime Meltdown On The Repeal Of Glass-Steagall.”