Sanford Weill is blowing Washington minds.
The former Citigroup CEO who helped engineer the country’s current financial system in the late ’90s says he now thinks investment banks and commercial banks should be split up.
His change of heart voiced on CNBC this week surprised pundits, banking leaders and lawmakers alike.
Frank Keating, president and CEO of the Washington-based American Bankers Association, said he was “dismayed” by Weill’s suggestion.
“It’s time to push the pause button on flawed proposals that would damage the U.S. economy,” Keating said in a statement today.
Karen Shaw Petrou, managing partner and co-founder of Federal Financial Analytics, argued that Weill’s suggestion couldn’t hold water. But first, she called out his about-face.
“Is Sandy Weill Wall Street’s Alfred Nobel, who took his then-untold millions earned by arms trafficking and created an eponymous peace prize?” she wrote in a memo to clients today. “Or is he more like a madam who, recanting profitable sins, heads to a comfortable convent populated by society’s nicest ladies?”
Former Senator Chris Dodd and Representative Barney Frank, after whom the 2010 financial overhaul was named, both criticized Weill’s comments on CNBC. His suggestion is poorly timed and unnecessary given the Dodd-Frank Act’s restrictions on proprietary trading known as the Volcker rule, Frank said yesterday.
Weill’s endorsement of bank breakups was hailed as “good news” by Senator Sherrod Brown. The Ohio Democrat is having trouble getting traction for a bill he introduced in May that would limit the size of banks.
“People who understand what’s happening with banks realize that these banks are too big to fail, too big to manage and too big to regulate,” Brown said in an interview yesterday.
Senator Robert Corker, Brown’s colleague on the Senate Banking Committee, said overseers’ ability to regulate banks has always been questionable, but Weill’s star power gives his remarks some kick.
“It’s just not possible to regulate in such a way that risk that’s concentrated in this way is mitigated,” the Tennessee Republican said in an interview yesterday. “I think people are looking at a lot of things, stronger capital. But I do think coming from someone like this makes it interesting and probably causes people to focus more on what he’s saying.”
Lawmakers hope to reach a decision on the Volcker rule by the end of the year, so Weill might have to wait a while for another banking overhaul.