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Citigroup's Ex-CEO Says Big Banks Should Break Up

Wednesday, July 25, 2012

Sandy Weill built Citigroup into a mega-bank. Now, he says mega-banks should be broken up.

Weill, 79 and the former CEO of Citigroup, says investment banks should be split from consumer banks. That would mean breaking apart Citigroup as well as other big banks like JPMorgan Chase and Bank of America.

Weill, speaking on CNBC's "Squawk Box," seemed to surprise the show's anchors. The banking industry's current leaders are generally trying to convince regulators that they don't need to be broken up.

“There is such a feeling among people, among regulators, among the political system all over the world against the banking system and I don’t think that’s going to change so soon," he said. "So I think what we should probably do is go and split up the investment banking from banking.”

Weill says the change is necessary if U.S. banks want to rebuild trust and remain on top of the world financial system.

Joe Nocera, an op-ed columnist with The New York Times and a WNYC contributor, says this is a particularly stunning turn of events given that Weill pushed hard for the end of the Glass-Steagall Act.

“The idea that you would break [big banks] up, which I have thought would be somewhat implausible,  to hear it come from somebody like Sandy Weill makes you think, well maybe it really could happen and maybe it really would work,” Nocera said.

He does note that it would be a difficult – but not impossible - process given the current interrelationship between banks.

Investment banks offer riskier but potentially more profitable services like trading stocks. Consumer banks offer plain-vanilla services like making loans and taking deposits.

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