Meet The Bankers Having Second Thoughts About Too-Big-To-Fail

By James Sunshine
The Huffington Post, August, 6, 2012

Sandy Weill, the former CEO of Citigroup and father of the modern too-big-to-fail bank, last month shocked Wall Street when he said that he thought it might be a good idea to break up the megabanks like the one he used to run.

He’s not alone in reversing his position. Former Merill Lynch CEO David Komansky, former CEO of CitiCorp John Reed, former CEO of Morgan Stanley Phil Purcell have also expressed doubts about the banking model that helped make them rich.

Their reasons for questioning too-big-to-fail vary. Purcell, for instance, merely opposes megabanks because he says shareholders would get more value if different banks were broken up. Others, like former Citigroup CFO Sallie Krawcheck, say it’s the incentive structure of too-big-to-fail banks that is the problem, not their size.

Sanford “Sandy” Weill, Former Chairman And CEO Of Citigroup
On July 25, former Citigroup CEO and father of the modern megabank, Sandy Weill shocked the business world when he announced on CNBC that he believed too-big-to-fail banks should be broken up. Rolling Stone columnist Matt Taibbi wondered aloud how Weill’s interviewer, Andrew Ross Sorkin, failed to ask his guest whether or not he was high. Weill lobbied for the repeal of Glass-Steagall in the late 1990s, the result of which helped make banks so big.

John Reed, Former Chairman Of Citigroup
The former Chairman of Citigroup, announced in 2009 that he was in favor of separating commercial and investment banks in a letter to The New York Times. During the merger negotiations between Reed’s consumer bank CitiCorp and Sandy Weill’s investment bank Travelers Group Inc. in 1998 — into what would become Citigroup — Reed reportedly suggested that the two banks merge and then quickly break up, dividing the group’s investment arm from its consumer arm, The Wall Street Journal reported. As Citigroup’s stockholders and the American taxpayers have since learned, Reed’s proposed merger and subsequent breakup never happened.

Phil Purcell, Former Chairman And CEO Of Morgan Stanley
The ormer Chairman and CEO of Morgan Stanley argued in a Wall Street Journal op-ed that megabanks like Bank of America, Citigroup, Goldman Sachs, JPMorgan and, yes, even Morgan Stanley should break up their different divisions into separate firms.

David Komansky, Former CEO Of Merrill Lynch
Former Merill Lynch CEO is one of the former megabank CEOs calling for the breakup of too big to fail banks, according to Simon Johnson.

Sallie Krawcheck, Former Chief Financial Officer Of Citigroup
Former Citigroup CFO Sallie Krawcheck has argued that big banks are simply too complex to manage. Megabanks like JPMorgan, which posted a multi-billion dollar trading loss in 2012, are so complex and the manager incentives so skewed that major losses like the ones JPMorgan posted are almost inevitable, Krawcheck said, according to The New York Times.

Instead, she argues for creating internal incentives that direct managers and executives towards focusing on the amount of risk their bank takes on. Paying executives in bonds and stocks, she argues, is a good place to start.

Richard Parsons, Former Chairman Of Citigroup
Parsons admitted that he believed the repeal of Glass-Steagall — the law separating commercial and investment banks — was one of the single greatest contributors to the 2008 Financial Crisis, Bloomberg reports.

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