"Congress’ overhaul of U.S. financial regulations should include ordering banks to hold more capital, ensuring executives’ compensation is aligned with long-term profitability and banning firms that take deposits from also engaging in equities and fixed-income trading," former Citibank ceo John Reed tells Bloomberg reporter Bob Ivry here.
Reed created Citigroup in 1998 when he merged the bank with Travelers Corp., whose ceo, Sandy Weill, outmaneuvered Reed for control of the combined company, got Congress and President Clinton to repeal the Glass-Steagall act and bless Citi's union of subprime home loans and investment banking, followed by losses that forced a multi-billion-dollar taxpayer bailout.
"I'm sorry" about the merger, said Reed. "I would compartmentalize the industry for the same reason you compartmentalize ships,” he added. “If you have a leak, the leak doesn’t spread and sink the whole vessel." Consumer banking, he concluded, should be "separate from trading bonds and equity.” Like under Glass-Steagall.
Posted by Joseph N. DiStefano @ 12:09 PM
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Clinton repeals Glass-Steagall and the liberals all blame Bush for the subprime/bank crisis and the bailout. Nice.
There's blame to go around all right. Clinton had a lot of help repealing Glass-Steagall. That was a bipartisan effort led in Congress by Senate Republicans. The only people I recall holding out against it in the end were left-wing Democrats.
Who had the majority in Congress? Thought so. It happened under "Slick Willies" watch, the same way people blame Bush for all things that happened when he was President. I'm not a Bush backer by any means, but fair is fair. I calls 'em as I see 'em.
Glass-Steagall was repealed by the Gramm-Leach act, written by Sen Phil Gramm, R-Tx (a former Democrat), and Rep Jim Leach, R-Iowa. The Republicans mostly led Congress under Clinton. That's how he got impeached, remember? Hello?
distefj got it right. There was a Republican majority in the Senate at the time and the vote on the repeal followed party lines. Pretty much all Republicans voted for it and all Democrats voted against it. Clinton signed the bill. By the end of the Clinton administration, the Treasury Sectretary was raising concerns but the economy was good and the polictical will to put regulations back in place were vigoriously fought by Republicans. That's because eliminating regulations and not enforcing existing regulations were and are core Republican principles. They still are today. Once Bush took office and the Republicans had the Senate and the House, there was no chance that this would be addressed and they did not enforce existing regulations. That's how we got into the mess we are in. Despite the disaterous effect of these Republican policies, they have not changed a single policy.
Hey Jeff, are you stupid or just ignorant. The Republican sponsored bill to repeal Glass-Steagal received 54-45 along party lines in the Senate. There was a Republican majority. Got it? As far as Clinton's accountability goes: He signed the bill and it would have never survived his veto. So yeah, I'd say he is ultimately responsible. But it was something Republicans pushed for 50 years and still do today. Total corruption. Go back over the last 50 years and see where we got all of our Treasury Secretaries and Federal Reserve Chairmen from. Wall Street runs our country and greed is the driving force.
Greed, corruption, politicians, 2-party system, laws quietly passed with no real news reporting---this is where we are, folks. Glass-Steagall was enacted during the depression to seperate commercial banks(our monetary system) from investment banking. That seperation was necessary to stableize the banks so people would have faith in them. But the politicians(who know what's best)repealed that pesky law because Wall Street didn't like it. So, Wall Street pulled off the biggest con job in history. Bernie Madoff was small-time in comparison. And after all that has happened, they still haven't reinstated Glass-Steagall.
Hello. Where's my 2:55PM post?
Whether government changes laws, who changed business smarts? You can't loan money to people who can't pay and expect everything to be ok in the end! Now every one pays because someone thought everyone needs to be in more debt than they can ever afford to get out of.
Kevin Timochenko
Ed, I'd disagree with you on one point. Gramm-Leach was reported in this newspaper and many others. Most Americans didn't care. 'It's about banking? Gimme the remote!' More people care now. Cordially, Joe D.
Hello. Where's my post?
Darn Jeff, I believe you just got served a few times. Typical right wing garbage.....say whatever you think Glenn Beck and Limbaugh would think or say. Super.
The banks didn't need the repeal of Glass-Steagall to implode, the S&L's did it just fine in the '80's with old fashioned bad real estate loans. You know, the ones where you loan someone who can't pay more than the value of what they're buying. Only this time, the banks bought insurance against loan failure from firms with insufficient collateral to insure them; and in typical insurance scam fashion, they bought more insurance (leverage) than the principal they were insuring. In the end, everyone owed Goldman more than they were worth.
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