"What we should probably do is go and split up investment banking from banking, have banks be deposit takers, have banks make commercial loans and real estate loans, have banks do something that's not going to risk the taxpayer dollars, that's not too big to fail,"… He added: "If they want to hedge what they're doing with their investments, let them do it in a way that's going to be market-to-market so they're never going to be hit." Sandy Weill creator of the Super Bank
What happens when a pioneer of American big banks advocates for the breakup of those same banks he helped create? What SHOULD happen is that we listen. Everyone should hear what Sandy Weill has to say…but more importantly, our Congressmen and President need to pay close attention. Sandy Weill isn’t an average banker. In the mid-1950s he received his first job as a runner for Bear Stearns on Wall Street. Weill’s financial career grew from there, and his 1998 mega-deal merger between Citibank and Traveler’s Insurance prompted Congress to overturn the Glass-Steagall Act—a six-decade ban between commercial and investment banking created by the financial crisis of the Great Depression. Weill influenced Congress then, why not now?
This time though, Weill, former Citigroup chairman and CEO, advocates for the
destruction of these U.S. financial conglomerates his leadership created. In 1999, Congress repealed Glass-Steagall and paved the way for the ascension of investment and commercial-bank mergers. At the same time President Clinton signed off on instructions to Fannie Mae that up to half the mortgages that it underwrote should be sub-prime, kicking the lending fury into high gear that ultimately put our system into peril.
What puts Weill’s advice into the man-bites-dog realm is his role in the creation of the system and its evident success until the financial fiasco of 2008. In the wake of 2008, rather than admit a mistake, his fellow bankers have had a hand in the debacle of trying to create a regulatory regime that micro manages the unmanageable. My concern expressed in a number of columns at the time was that the commercial banking system operates as a public utility. As to the financial clearance process, the safeguarding of normal depositor savings, home mortgages and regularity of commerce requires the highly leveraged proprietary trading by the investment banks are not joined in any way to the financial liquidity needs of this system as a whole.
Professor Freer is the BB&T Visiting Professor in Ethics and Free Enterprise Leadership at The Citadel, the Military College of South Carolina in Charleston, S.C., after a career in law, government, and corporate management spanning a half century. Professor Freer served as a government trial attorney, assistant to two Chairmen of the Federal Trade Commission, and for the General Counsel of the U.S. Department of Transportation. Picked by Kimberly–Clark Corporation to be its Washington Counsel, he became its youngest vice-president and was responsible for its representation before all governmental bodies, and for energy management and environmental compliance and control. Following his retirement from Kimberly-Clark, he was a principle in several law firms, including his own mid-sized Washington firm, and came to the academic realm as the first John S. Grinalds Leader in Residence at The Citadel and as an adjunct professor at The Charleston School of Law.
Prof. Freer was part of a very small team working with Casper Weinberger and Edwin Meese to create the structure for the Reagan Administration’s transition. He was appointed by President Ronald Reagan as a Commissioner of the White House Fellows Commission and served as Captain of the Grace Commission’s Land Team. He also served as Assistant General Counsel of four Republican National Conventions.
Prof. Freer founded the Washington Metropolitan Area Corporate Counsel’s Association in 1979. He followed that as the co-founder of the Republican National Lawyers Association in 1985, Washington Episcopal School in 1986, of which he remains Chairman Emeritus, Lawyers for the Republic in 1988, the U.S. Cuba Business Council in 1993, and the Free Enterprise Foundation in 2002, for which he is the current chairman.
Dr. Freer has also edited and authored several books: Finding Our Roots, Facing Our Future: America in the 21st Century, Citadel Values I and II, and the novel, Eagles Quest under the pseudonym Elliott Robins.
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