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Wall Street’s Biggest Sinner Repents

Economy Memo Pad

Wall Street’s Biggest Sinner Repents


Hallelujah and Holy Smokes! Wall Street has had a “come to Jesus” moment — the biggest sinner on the Street has repented!

He is Sandy Weill, the once-lionized dealmaker who turned our banks into financial “supermarkets” that tie us everyday depositors and Main Street borrowers to the profiteering schemes of unbridled Wall Street traders and the whims of global speculators. Thanks, Sandy — for nothing.

Beginning in the late 1980s, Weill went on a decade-long merger binge, taking over Travelers Insurance, Smith Barney, Aetna, Solomon Brothers and other powerhouses of high finance, culminating in 1998 with his grabbing of Citibank. The whole empire was named Citigroup, Weill was paid a king’s ransom, and his conglomerated entity was widely hailed as a work of genius. Only one problem: It was illegal.

After the financial collapse of 1929 led to the Great Depression, the Glass-Steagall Act was passed to protect people’s deposits from another system-wide crash by prohibiting banks from also owning stock brokerages, insurance corporations, hedge funds and other shadowy, high-risk financial operations.

Picky-picky, said Weill, who hired a hoard of lobbyists to demand that Washington legalize his illegal structure by simply repealing the pesky law he was blatantly violating. He even brought former President Gerald Ford and former Clinton Treasury Secretary Robert Rubin onto Citigroup’s board of directors to be bipartisan front men leading the charge to kill Glass-Steagall.

Sure enough, in 1999, Congress dutifully went along with Weill’s push for repeal, and Wall Street promptly rushed to amalgamate more Citigroups, thus creating the “too-big-to-fail” system that — only eight years later — did indeed fail. Weill’s “work of genius” forced a multitrillion-dollar bailout on us taxpayers (including $45 billion that went to Citigroup itself), and it wrecked America’s Main Street economy. By then, though, the genius had retired with so much money that he could afford to air-condition hell.

But now — approaching 80 and perhaps hoping to avoid that destination — Weill has suddenly become a born-again convert to the gospel of Glass-Steagall. Late last month, the architect of today’s megabanks called for them to be “split up” so they do not “risk taxpayer dollars” and are “not too big to fail.”

Jim Hightower

Jim Hightower is a nationally syndicated columnist and one of America's most prominent progressive voices. His column carried by more than 75 publications across the country. Prior to becoming a writer, Hightower served as Texas Agricultural Commission from 1982 to 1991.

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  1. sleeprn01 August 2, 2012

    I guess that the repeal of Glass-Steagall demonstates that indeed you can highjack a democracy for your own personal agenda. Citizens United…want to buy a government!!

  2. Landsende August 2, 2012

    Once again a billionaire bought off politicians to change the law to benefit his grandiose scheme and when it failed and threatened to destroy the economy taxpayers had to bail him out. Yet he still walked away a billionaire and didn’t have to forfeit any of his wealth to taxpayers. Most people that get into financial trouble don’t get government bailouts, just those wealthy enough to buy off politicians.

  3. Bunny August 2, 2012

    How is this crook going to be dealt with in the courts. Nother, Right?

  4. overpaidCS August 2, 2012

    And he thanks Bill Clinton barney Frank and Chris Dodds for allowing this to happen

    1. RobBar August 4, 2012

      How about thanking ALL the politicians!!!!!

    2. John August 8, 2012

      The Bill to repeal Glass-Steagall was named “[Texas GOP Senator Phil] Graham-Leach”. Poor Rep. Leach. The other guys at least tried to help solve the problem.
      Signing the Bill was a bigger mistake than Monica.
      The three institutions that know the LEAST about real estate are, in no particular order–The Fed, commercial banks & Wall Street. Congress is a close fourth.
      In real estate we have The Greater Fool Theory–“I will overpay for this property, and then find a Greater Fool than I, to take it off my hands, at a profit.”
      The entire USA subscribed to that Theory from 2003-2007, and it nearly wrecked the nation.

  5. dtgraham August 3, 2012

    It wasn’t just America that got it. These banker salesmen fanned out across Europe and convinced over 1000 municipalities and institutions to enter into a derivative agreement with the banks. They would say to them that you’re paying 5% a year on your debt (example.). We can lower it to 2% but you have to enter into a derivative with us—-an interest rate swap, an option, some kind of derivative. They would say that as long as something doesn’t happen in the market, your interest rates will stay low.

    The problem with these things is that they often involve highly leveraged bets and are very dangerous. They can be anything, but are basically contracts or bets that derive their value from the performance of something else….a bond, a stock, a loan, a currency—-virtually anything. A small change in market conditions can mean huge losses.

    These guys engaged in a couple of practises that came to be known as governance arbitrage, where the banker would find the type of client who doesn’t understand the product and shouldn’t be buying it, and regulatory arbitrage; an esoteric term for figuring out a complicated financial structure that achieves some objective that you couldn’t achieve otherwise in a legal way.

    Weill is actually not the only one who’s experienced a come to Jesus moment. Claudio Costamagna of Goldman Sachs (1988-2006) said that “even the bankers didn’t really understand derivatives swaps and products.” Bill Winters of JP Morgan (1983-2009) recalled leading less sophisticated municipal officials down the wrong path. He remarked that “that was the abuse of the derivatives market.” “Because of their opaqueness and exotic nature, they were easy to abuse.”

    In the old days, Wall St and the finance industry financed things that got done, be it the railroads, interstate system, factories, etc.. What has entirely changed is their focus. If it happens that they can also finance something productive along the way, fine, but that’s no longer part of the core business. The trading side (selling derivatives, making proprietary bets) has become 3-4 times bigger than the banking side because that’s where the really big money is made. Traders are incentivized to get deals done, even at the customer’s expense. “Ripping someone’s face off” was used to describe extracting a massive fee from customers who didn’t understand the products or the deal. The spirit of being antagonistic towards the client took on a life of it’s own on Wall St.

    This is what deregulation has brought. The modern American god is now finance, but it’s turned out to be a very cruel and destructive god.

  6. Dave_dido August 7, 2012

    Where are Mr.Obozo, Montana Bill, Michael Stoll and all the other Tea Partiers who like to join these threads? Aren’t you going to come to Mr. Weill’s defense? Aren’t you going to tell us that the wealthy don’t bribe our representatives to make legislation favorable to them, to” rig the system”, so to speak? Aren’t you going to remind us that billionaires are just hardworking people and it’s their hard work that got them where they are and that we non- Tea Partiers are just jealous? Please write a comment, Tea Partiers, and tell us once again that the Sandy Weill’s of America already pay enough in taxes. Tell us how we are guilty of class warfare when we criticize the Sandy Weills. We’re waiting to hear from you.


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