LITTLE ROCK — Sanford Weill, who ushered in the era of big banks with the creation of Citigroup Inc., said Wednesday that U.S. lenders should be broken up to protect taxpayers.
“What we should probably do is go and split up investment banking from banking,” Weill, 79, said in an interview on CNBC’s Squawk Box. “Have banks do something that’s not going to risk the taxpayer dollars, that’s not going to be too big to fail.”
We i l l helped engineer the 1998 merger of Travelers Group Inc. and Citicorp, a deal that required the U.S. government to overturn the Glass-Steagall law, which had kept deposit-taking companies separate from riskier investment banks. The company became the biggest lender in the world before almost failing and taking a $45 billion taxpayer bailout.
“We can have size and scale, but it doesn’t have to be connected to a deposit-taking institution,” Weill said. “Have banks be deposit takers, have banks make commercial loans and real-estate loans.”
Weill said the radical change is necessary if U.S. banks want to rebuild trust and remain leader of the world’s financial system. “Our world hates bankers,” he said.
Weill held the positions of chairman and chief executive officer of New York-based Citigroup after the merger. He retains the title “chairman emeritus.”
Weill’s professed conversion set off a flurry of reactions. The banking industry’s critics said it was proof that the biggest banks should be split. “Sanford Weill is one of many banking industry experts who have observed that too big to fail is often too big to manage,” U.S. Sen. Sherrod Brown, DOhio, said in a statement.
Others were unimpressed.
Joshua Brown, a New York investment adviser who writes the blog The Reformed Broker, called Weill “the original architect of Too Big To Fail” banking and noted that Weill didn’t apologize “for the Citigroup he built or its imitators.”
“Perhaps this is about burnishing his legacy,” Brown wrote.
Weill said he hasn’t spoken with Citigroup Chief Executive Officer Vikram Pandit or JPMorgan Chase & Co.’s Jamie Dimon about breaking up the biggest U.S. banks.
Dimon was Weill’s protege before getting ousted in a power struggle in the late ’90s. Pandit took over at Citigroup after Weill’s friend, Chuck Prince, lost the job.
Asked what he thought their reaction would be, Weill replied, “I don’t know. You’ll find out.”
Jon Diat, a spokesman for Citigroup, declined to comment on Weill’s remarks. A JPMorgan spokesman didn’t immediately return a message seeking comment.
Richard Parsons, who earlier this year ended a 16-year tenure on the board of Citigroup, said in April that the 1999 repeal of the Glass-Steagall law made the business more complicated and ultimately helped cause the financial crisis.
Former Citicorp CEO John Reed apologized in 2009 for his role in building Citigroup and said banks that big should be divided into separate parts.
Weill said Wednesday that he altered his view about the industry because “the world changes.” He has been thinking about it a lot over the last year, he said.
“The world we live in now is not the world we lived in 10 years ago,” Weill said. “Good things are simple.”
Former President Bill Clinton said when he signed the repeal of Glass-Steagall that it was “no longer appropriate” for the economy.
“The world is very different,” Clinton said at a White House signing ceremony.
Information for this article was contributed by Christine Harper and Laura Marcinek of Bloomberg News and by Christina Rexrode of The Associated Press.
Business, Pages 25 on 07/26/2012