Call it an about-face, a switcheroo or an epiphany, but whatever you call it, ex Citigroup CEO Sandy Weill is surprising plenty of people in the industry by saying megabanks should be broken up. This, from the man who helped steer Citigroup to its current ginormous conglomerate status.
Weill retired as CEO in 2003 but stayed chairman until 2006, during which time he wheeled and dealed the company into a behemoth that offers both consumer and investment banking. Fast forward to today, when he said big banks should get the sledgehammer treatment.
During an interview on CNBC’s Squawk Box, the 79-year-old told the show’s anchors when he said that consumer banking units should be split from riskier investment banking units. Yes, that would include Citigroup, as well as its big peers JPMorgan Chase and Bank of America.
“Our world hates bankers,” he said, adding that the change is needed to rebuild trust of banks in the U.S. and remain the leader of the world’s financial system.
Big banks have been criticized for making risky investments which ultimately lead to a global economic downturn, as well as taxpayer money going into bailouts of these mega institutions. Standalone investment banks wouldn’t take deposits, said Weill, which means they wouldn’t need to be bailed out.
Banks with both investment banking — which can bring in huge profits or sink to horrible lows — and the slower, steadier profits of consumer banks say they need both to balance each other out.
Weill said banks have already taken on too much debt and need more disclosure, even while crediting mega-banks for doing some good like helping to move poor people into the middle class.
“It is really sad what is happening, and it’s sad for young people,” he said. “This was an industry that attracted a lot of really terrific people.”
So why the sudden change of heart? He says he’s been thinking things through for a year.
“I think the world changes,” he said, “and the world that we live in is different than the one that we lived in 10 years ago.”