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| On another wall hangs a hunk of wood — at least 4 feet wide
— etched with his portrait and the words “The
Shatterer of Glass-Steagall.”
Citi’s Creator, Sandy Weill, |
Oct.-Nov. 1999 Congress passes Financial Services Modernization Act After 12 attempts in 25 years, Congress finally repeals Glass-Steagall, rewarding financial companies for more than 20 years and $300 million worth of lobbying efforts. As pretty sycophantic article in NYT stated (Citi’s Creator, Sandy Weill, Alone With His Regrets ):
To create Citi, he fought to change laws that had prevented banks, insurers and brokerage firms from merging. But in the wake of the economic crisis last year, Congress has introduced laws to reinstate parts of the legislation. In November, Mr. Weill’s former co-C.E.O. at Citi, John Reed, told Bloomberg News that he was sorry for his role in helping to end Glass-Steagall.
When asked about Mr. Reed’s apology, Mr. Weill says: “I don’t agree at all.” Such differences, he says, were “part of our problem.”
Mr. Reed, who lost a battle with Mr. Weill for control of Citi, declined to comment for this article.
... ... ...
Mr. Weill personally recruited Robert Rubin to Citi after Mr. Rubin stepped down as Treasury secretary. Mr. Rubin, who has since left Citi and declined to comment about his tenure there, has been criticized as failing to help rein in the bank’s excesses.
Mr. Weill says he has no regrets about hiring Mr. Rubin and wishes that things with Mr. Dimon had worked out differently.“The problem was in 1999 he wanted to be C.E.O. and I didn’t want to retire,” he says of Mr. Dimon. “I regret that it came to that. I don’t know what else could have been done except for him to be more patient.” A JPMorgan spokesman said Mr. Dimon declined to comment.
Analysts say that managerial problems plagued the Citi empire and that its board, which might have imposed some order, became little more than a rubber stamp during the Weill era. “Sandy surrounded himself with yes men,” says Mr. Whalen. “He never wanted anyone second-guessing him.”
At the time supporters hailed the change as the long-overdue demise of a Depression-era relic.
On Oct. 21, with the House-Senate conference committee deadlocked after marathon negotiations, the main sticking point is partisan bickering over the bill's effect on the Community Reinvestment Act, which sets rules for lending to poor communities.
Sandy Weill calls President Clinton in the evening to try to break the deadlock after Senator Phil Gramm, chairman of the Banking Committee, warned Citigroup lobbyist Roger Levy that Weill has to get White House moving on the bill or he would shut down the House-Senate conference.
Serious negotiations resume, and a deal is announced at 2:45 a.m. on Oct. 22.
Sanford I. Weill - Wikipedia, the free encyclopedia
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April 19, 2012
This story originally appeared at Truthdig. Robert Scheer is the author of The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street (Nation Books).
How evil is this? At a time when two-thirds of US homeowners are drowning in mortgage debt and the American dream has crashed for tens of millions more, Sanford Weill, the banker most responsible for the nation's economic collapse, has been elected to the American Academy of Arts & Sciences.So much for the academy's proclaimed "230-plus year history of recognizing some of the world's most accomplished scholars, scientists, writers, artists, and civic, corporate, and philanthropic leaders." George Washington, Ralph Waldo Emerson and Albert Einstein must be rolling in their graves at the news that Weill, "philanthropist and retired Citigroup Chairman," has joined their ranks.
Weill is the Wall Street hustler who led the successful lobbying to reverse the Glass-Steagall law, which long had been a barrier between investment and commercial banks. That 1999 reversal permitted the merger of Travelers and Citibank, thereby creating Citigroup as the largest of the "too big to fail" banks eventually bailed out by taxpayers. Weill was instrumental in getting then-President Bill Clinton to sign off on the Republican-sponsored legislation that upended the sensible restraints on finance capital that had worked splendidly since the Great Depression.
Those restrictions were initially flouted when Weill, then CEO of Travelers, which contained a major investment banking division, decided to merge the company with Citibank, a commercial bank headed by John S. Reed. The merger had actually been arranged before the enabling legislation became law, and it was granted a temporary waiver by Alan Greenspan's Federal Reserve. The night before the announcement of the merger, as Wall Street Journal reporter Monica Langley writes in her book "Tearing Down the Walls: How Sandy Weill Fought His Way to the Top of the Financial World... and Then Nearly Lost It All," a buoyant Weill suggested to Reed, "We should call Clinton." On a Sunday night Weill had no trouble getting through to the president and informed him of the merger, which violated existing law. After hanging up, Weill boasted to Reed, "We just made the president of the United States an insider."
The fix was in to repeal Glass-Steagall, as The New York Times celebrated in a 1998 article: "…the announcement on Monday of a giant merger of Citicorp and Travelers Group not only altered the financial landscape of banking, it also changed the political landscape in Washington.... Indeed, within 24 hours of the deal's announcement, lobbyists for insurers, banks and Wall Street firms were huddling with Congressional banking committee staff members to fine-tune a measure that would update the 1933 Glass-Steagall Act separating commercial banking from Wall Street and insurance, to make it more politically acceptable to more members of Congress."
At the signing ceremony Clinton presented Weill with one of the pens he used to "fine-tune" Glass-Steagall out of existence, proclaiming, "Today what we are doing is modernizing the financial services industry, tearing down those antiquated laws and granting banks significant new authority." What a jerk.Although Weill has shown not the slightest remorse, Reed has had the honesty to acknowledge that the elimination of Glass-Steagall was a disaster: "I would compartmentalize the industry for the same reason you compartmentalize ships," he told Bloomberg News. "If you have a leak, the leak doesn't spread and sink the whole vessel. So generally speaking, you'd have consumer banking separate from trading bonds and equity."
Instead, all such compartmentalization was ended when Clinton signed the Gramm-Leach-Bliley Act in late 1999. In his memoir Weill brags that he and Republican Senator Phil Gramm joked that it should have been called the Weill-Gramm-Leach-Bliley Act. Informally, some dubbed it "the Citigroup Authorization Act."
Gramm left the Senate to become a top executive at the Swiss-based UBS bank, which like Citigroup ran into deep trouble. Leach-former Republican Representative James Leach-was appointed by President Barack Obama in 2009 to head the National Endowment for the Humanities, where his banking skills could serve the needs of intellectuals. Robert Rubin, the Clinton administration treasury secretary who helped push through the Citigroup Authorization Act, was the most blatant double dealer of all: He accepted a $15-million-a-year offer from Weill to join Citigroup, where he eventually helped run the corporation into the ground.
Citigroup went on to be a major purveyor of toxic mortgage–based securities that required $45 billion in direct government investment and a $300 billion guarantee of its bad assets in order to avoid bankruptcy.
Weill himself bailed out shortly before the crash. His retirement from what was then the world's largest financial conglomerate was chronicled in the New York Times under the headline "Laughing All the Way From the Bank." The article told of "an enormous wooden plaque" in the bank's headquarters that featured a likeness of Weill with the inscription "The Man Who Shattered Glass-Steagall."
That's the man the American Academy of Arts & Sciences now honors, among others, for "extraordinary accomplishment and a call to serve." Disgusting.
Robert Scheer is the author of The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street (Nation Books). Robert Scheer, a contributing editor to The Nation, is editor of Truthdig.com and author of The Great American Stickup..
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September 23, 2011 | naked capitalism
LeeAnne:
He's fun. There's a poster of his on ZeroHedge this morning that's simple and priceless.
My problem with Sandy Weill is that he is the one known for proudly displaying a plague in his office celebrating his single-handed destruction of Glass-Seagal.
The death knell came about when he hired Robert (Bob) Rubin straight out of the Secretary Treasurer position in the Clinton administration, and ex-President Gerald Ford.
One to represent his interests in Congress on the Republican side; the other on the Democrat side.
He also came close to being indicted criminally. I'd love to know some of those details. He is said to have narrowly escaped those charges.
Sandy Weill was also the first person in Wall Street (such a leader) to have his own in-house public relations staff. This is in the late 1960s. Worth mentioning, because it is a mystery to me how his name gets only a wee mention occasionally in all of these books that have been written on Wall Street crimes.
René:
Okay, that's interesting I didn't know that he was behind that single-handedly. Well, his PR staff did a good job hiding his name… he is also not in the picture with Al Greenspan :-)
LeeAnne:
He practically invented (scuse, re invented) the no competition 'free market' in finance when his merger, the biggest in history at that time, was up and running a couple of years before it was possible in law.
Who, knowing he owned the law-making process, would interfere during that time period -like make a competitive bid?
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is story originally appeared at Truthdig. Robert Scheer is the author of The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street (Nation Books).
Rejoice, the housing market is back. Sandy Weill just picked up a humdinger of a wine vineyard estate in Sonoma, Calif., for a record $31 million, so the foreclosure crisis-which the former CEO of Citigroup did so much to create when he successfully lobbied then-President Bill Clinton to sign off on radical deregulation of the banking industry-must be over.
After all, Weill wasn't desperate for shelter, already being in possession of a fourteen-acre estate in über-exclusive Greenwich, Connecticut, and a 120-acre spread in New York state's Adirondacks. Let's also not forget the penthouse that he bought for $42.4 million in New York City in 2007 as the banking collapse he helped engineer was fast developing. Not too shabby for a guy who ran Citigroup into the ground by trafficking in what proved to be toxic mortgage-based securities.
Thanks to legislation that Weill got President Clinton to sign off on, Citigroup was allowed to become too big to fail, and when fail it did, the taxpayers had to bail the humongous bank out-to the tune of $50 billion in a direct subsidy and $306 billion more for the housing mortgage-backed securities Citigroup was holding. The Treasury still owns a good chunk of Citigroup common stock, now trading at a paltry four dollars and change per share. However, like all of the other top dogs involved in this scandal, Weill has emerged from a housing crisis that has impoverished tens of millions of Americans with his own personal fortune intact. Indeed, as evidenced by his vineyard purchase, he has quite a bit of money to throw around.
Although the value of most housing in Sonoma County, in the heart of the wine country, is down 30 to 50 percent, Weill was willing to pay close to the asking price for his new property. And why not? As the San Francisco Chronicle website quoted one Coldwell Banker real estate agent as saying, the sale "is not an indicator of an emerging real estate recovery, but rather the ability of the world's wealthiest individuals to buy what they desire."
Some guys have all the luck, particularly when they supply the dice. There would be no housing crisis were it not for radical financial deregulation legislation that Weill and other Wall Street hotshots got Clinton to approve. First Weill engineered a merger of the Travelers insurance company, which he headed and which included investment banking in its portfolio, with the commercial banking entity of what was then Citicorp. That merger would have been judged illegal because of the Glass-Steagall legislative barrier to merging investment and commercial banking that President Franklin Roosevelt signed into law to prevent another Great Depression, but Weill got the law changed to accommodate his plans.
Boy, was Weill ever persuasive, not only enlisting the bipartisan support of Washington politicians but the enthusiastic backing of the establishment media. As the New York Times editorialized back in April of 1998 in praising the merger: "In one stroke Mr. Reed [John Reed of Citigroup] and Mr. Weill will have temporarily demolished the increasingly unnecessary walls built during the Depression to separate commercial banks from investment banks and insurance companies." A Times news story that day also read like a Wall Street lobbyist's press release: "In a single day, with a bold merger, pending legislation in Congress to sweep away Depression-era restrictions on the financial industry has been given a sudden, and unexpected, new chance of passage. … Indeed, within 24 hours of the deal's announcement, lobbyists for insurers, banks and Wall Street firms were huddling with Congressional banking committee staff members to fine-tune a measure that would update the 1933 Glass-Steagall Act separating commercial banking from Wall Street and insurance.…" Notice the Times's use of "update" to mask what was a clear reversal of the law.
It helped that former Goldman Sachs honcho Robert Rubin was Clinton's treasury secretary, and after the bill was passed, Weill rewarded Rubin with a $15-million-a-year job at the new Citigroup, which was now legal, thanks to the legislation Rubin had helped pass. When Clinton signed the bill reversing Glass-Steagall and making the Citigroup merger legal, he gushed: "Today what we are doing is modernizing the financial services industry, tearing down those antiquated laws and granting banks significant new authority." Clinton then handed Weill a pen he used in signing the bill, and that pen ended up framed on the wall at the CEO's office near a plaque that paid tribute to Weill as "The Man Who Shattered Glass-Steagall." And shattered our economy as well. His are the grapes of wrath.
Robert Scheer is the author of The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street (Nation Books).
roundtable
Rubin, Weill, Clinton, Greenspan, Volcker, Summers, Geithner, and Paulson are all members of the Council on Foreign Relations. Why did Scheer miss the connection?
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March 2, 2009
"In the 1930s, at the trough of the Depression, when Glass-Steagall became law, it was believed that government was the answer. It was believed that stability and growth came from government overriding the functioning of free markets. We are here today to repeal Glass-Steagall because we have learned that government is not the answer."
Phil Gramm, Chairman of the Senate Banking Committee - November 12, 1999 at the Signing of the Gramm-Leach-Bliley ActSo here are a couple of good jeopardy questions. Category: United States Banking, 20th Century.
What's the difference between notorious bank robber John Dillinger and Sandy Weill, former CEO of Citigroup? Answer: Dillinger had a gun.
What's the difference between John Dillinger and Robert Rubin, former head of the U.S. Treasury? Answer: Dillinger was wanted by the Law; Rubin was the Law.
For sixty-six years, between the Great Depression under FDR and the Great Repression under Ronald Reagan, there was a "Chinese Wall" that separated investment and commercial banking. The Glass-Steagall Act enacted in 1933 prohibited commercial banks from participating in investment banking activities. Banks were forced to choose between straightforward lending and underwriting stocks and bonds.
In 1956, the law was extended with the Bank Holding Act which restricted banks from owning non-banking institutions like insurance companies. The purpose of the law was to eliminate the conflicts of interest that contributed to the stock-market crash of 1929. Additionally, Glass-Steagall established the Federal Deposit Insurance Corporation guaranteeing individual deposits by the federal government.
All that went out the window with the enactment of the Gramm-Leach-Bliley Act of 1999. This law effectively repealed any restrictions that had safeguarded banking for most of the twentieth century.
Deposits were now at the mercy of the cowboy bankers. Commercial banks could use depositor cash to invest in toxic sub-prime mortgage securities, "weapons of financial mass destruction" aka credit default swaps, and structured products like the dubious collateralized debt obligations saddling taxpayers with 100% of the risk.
Depositor's savings were supplying mortgage loans to porn stars with 500 credit scores, pear-shaped pools for bucket shop lenders, and surround-sound entertainment systems for bank executives' luxury jets.
Yippee! There was a big boozy bond market party going on between 1999 and 2008. All on the America taxpayer's dime-only you weren't invited.
One Man's DreamGlass-Steagall repealer Phil Gramm is right. Things change with time and laws need updating.
Poor Johnny D didn't even know all he needed for his get rich quick scheme was a job at the bank and a better suit. The days of "stick-em-up" bank robbery are long over-nowadays with a friend in government all you need to do is change the law!
Sandy Weill, CEO of Traveler's, the huge insurance corporation, had a dream. To create the first one stop shopping "financial supermarket" and in the process reap a billion dollar fortune for himself. The dream pushed him to buy the securities firm Salomon Brothers and combine it with retail brokerage firm Smith Barney. The banking king merged the new Salomon Smith Barney and Traveler's and commercial banking giant Citicorp in 1998.
Only there was one little teeny weeny problem… it was illegal. The remnants of Glass-Steagall which had been whittled down through the Reagan and Clinton years by banking lobbyists and the Federal Reserve stood in the way. Not to worry, CEO Weill had non-partisan buddies in Senator Phil Gramm, U.S. Treasury Secretary Rubin and his Deputy Treasury Secretary Larry Summers (yes the one with the big shadow behind little Timmy Geithner).
Weill, along with his faithful triumvirate, persuaded President Clinton and Fed Chief Greenspan to support overturning the "outdated" Glass-Steagall. With the swoop of the pen, Clinton signed the new Gramm-Leach-Bliley Act into law allowing commercial and investment banking under one roof –something that had not been done since Herbert Hoover. Furthermore, banks would now be free to merge with other banks, insurance companies, securities firms, pizza franchises…(Ok, that's a joke. I thought a supermarket might need some food.)
With the reversal of the official regulator Glass-Steagall, any conflict of interest and risk to taxpayers and investors was completely swept aside. The biggest government bank bailout only nine years ahead was set in motion.
Sandy Weill's successful lobbying resulted in the creation of what Charlie Rose called, "the biggest bank in the history of the world." Two months after the collapse of Bear Stearns, Weill defended the global "financial supermarket." He bragged to Rose, "They were able to raise $44 billion in capital at Citibank, because people believed in the model."
But dreams die hard. Sandy Weill's vision of superbanking stardom has gone the way of the American Dream-out of sight and out of reach. In May of 2008, worried over the rapid tanking of his Citigroup stock he told Rose, "I'm scared." Mr. Weill, as we look at the rubble of our banking system caused by banks using federally insured depositor money to gamble on risky toxic investments, so are we.
As taxpayers injected $45 billion dollars of emergency cash in exchange for 36% of common Citigroup stock that even Weill no longer wants, the American public belief in the financial supermarket model has vanished. It has gone the way of the Titanic. Looks great in the Harbor, but sinks when it sails the seas.
In 2006, Weill announced he was leaving finance for good to honor his "deal with God." He pledged $1.4bn dollars to philanthropic works like medical research. As Citigroup stock hovers around $1.39 a share, from a high of $55, Weill must be deeply regretting that pledge now.
Shortly after the Glass-Steagall Act was repealed, Weill's political friend Robert Rubin left the U.S. Treasury to join him at Citigroup as co-chairman of the Board of Directors. Earning $115m over his nine years on the board, Rubin is blamed by many for failing in his fiduciary duty to advise the bank on the perils of toxic credit derivatives and subprime mortgage securities. To the frustration of shareholders, fellow board members and taxpayers, the former U.S. Treasury Secretary has refused to take any responsibility for Citigroup's financial woes.
This economic crisis has unequivocally proven that Sandy Weill and Robert Rubin do indeed have the "deal with God." It is the same deal every other money manager of a banking institution has, and it does not involve giving millions to plaster your name on the walls of great institutions.
Banking officers hold a sacred trust over other people's money. They are charged with using borrowed funds for careful investments for shareholders, depositors and ultimately taxpayers. A manager of billions of federally insured dollars has in his or her hands the grave financial and moral responsibility to manage these funds with the understanding they do not belong to you. They ultimately belong to the American people. Your "deal with God" is to honor that solemn trust and not "take them dives for the short-end money," as Terry Malloy would say.
Ten years after Phil Gramm uttered his fateful words, they are revealed as tragically flawed. The economic crisis shows we do indeed need government "overriding" the free markets. These days the government seems to be the only answer for insuring free markets remain free for all, not just a few dreamy bankers, but for ordinary dreamy Americans too.
Only it must be a "government" that is trustworthy, not quasi-bankers whose self-interests are allowed to endanger national interest.
It brings to mind the lyrics of that Willie Nelson tune which I paraphrase here:
Mamas don't let your babies grow up to be bankers.
Though they have many homes, they're always alone.
In the end, they may not have even money to love.
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The banking and financial industry complained about the Banking Act of 1933 even as Congress debated it. As the Act worked its way through Congress, banks vigorously opposed it, causing some doubts about whether it would pass, especially with the provisions Carter Glass advocated that prevented banks from entering into the stock market.
Initial Banking Opposition to Glass-Steagall
The centerpiece of the debate over Glass-Steagall was a three-week filibuster by Louisiana Senator Huey Long, which would stand as the longest filibuster in Congressional History until Strom Thurmond's filibuster of the Civil Rights Bill. This so incensed Glass that he accused Long of being in the pockets of the banks. The American Banking Association opposed the bill. According to a paper by Jill M. Hendrickson
in 1932, 36 percent of national bank profits came from their investment affiliates (Wall Street Journal 1933b, p. 1).
Glass, in his typical style, made this point more forcefully:
Nobody can conceive of the damage done by these affiliates. They literally loaded the portfolios of interior banks with foreign securities approved by this abominable State Department. [New York Times, December 6, 1933]
Many believe the key moment that changed opposition to Glass-Steagall came with the release of the text of investigative hearings held by New York Senator Ferdinand Pecora. His investigation into banking practices uncovered abuses including:
Reputable investment houses that pushed on unsuspecting investors the securities of a company in which they were closely associated; speculation on the stock exchange; and evasion of income taxes on huge earnings by investment bankers. These questionable activities were aided by the commercial banks as they advised their depositors to use their affiliates' security salesmen for investment advice.
The hardball tactics by Pecora's committee seem to come from an America and a Democratic Party the exist only in dim memory, but the Committee's findings aroused such an outcry that newly-elected President Franklin Roosevelt knew something had to be done. Hendrickson adds that perhaps as instrumental was the impact of the stock market crash itself which made investing in securities less attractive to banks.
Whatever the reason, Glass-Stegall survived Long's filibuster and became law. Ever since the Act has been a thorn in the side of American financial industry which like the proverbial lion has howled about the thorn in its paw.
Investment Company v Camp
The most notable moment in the attempts to scuttle Glass-Steagall came with the 1971 Supreme Court decision Investment Company Institute v. Camp. In that complex case the Court issued one of the most ringing and unequivocal defenses of Glass-Steagall:
Congress was concerned that commercial banks in general and member banks of the Federal Reserve System in particular had both aggravated and been damaged by stock market decline partly because of their direct and indirect involvement in the trading and ownership of speculative securities.
The legislative history of the Glass-Steagall Act shows that Congress also had in mind and repeatedly focused on the more subtle hazards that arise when a commercial bank goes beyond the business of acting as fiduciary or managing agent and enters the investment banking business either directly or by establishing an affiliate to hold and sell particular investments.
Many arguments the Supreme Court advanced in support of Glass-Steagall, would prove prophetic three decades later.
Rising Opposition
As the Republican Counterrevolution gained power, the GOP began nibbling away at Glass-Steagall. These challenges had both symbolic and legal implications. The two pieces of New Deal legislation the have most irked the Counterrevolution have been Glass-Steagall and Social Security. One dared assert that the government in the interests of the greater good had the right to regulate the nation's financial industry and the other established the principal that the government had a duty to help the less fortunate to insure a level playing field.
It would take too long to recite all the actions that chipped away at Glass-Steagall but a few highlights stand out. In the mid-1980s a Federal Reserve Board stocked with Reagan-Bush appointees began reinterpreting Glass-Steagall in a series of actions that slowly expanded the ability of banks to engage in other financial operations. In 1990, the Fed, under former J.P. Morgan director Alan Greenspan, permitted guess who–J.P. Morgan–to become the first bank allowed to underwrite securities. It is noteworthy that if William Jennings Bryan had had his way about the Federal Reserve Act, Greenspan would have never ascended to the position that allowed him to weaken the act named for the father of the Federal Reserve System.
Four legislative attempts were made to weaken or repeal parts of Glass-Steagall from 1988-1996. One reason they failed is because smaller banks feared that opening the doors to allow banks to trade in securities would lead to the domination of larger banks–a fate that has come to pass. The biggest change came in 1996 when Alan Greenspan issued a ruling allowing bank investment affiliates to have up to a quarter of their business in investments.
The Rise of Sandy Weill
In the up-tempo financial atmosphere in the years surrounding the Greenspan ruling, all sorts of financial innovations took place, some ingenious and some illicit. Of the latter the most notorious was Enron. In this go-go market it was all but inevitable that mortgages should be drawn into this activity.
For most Americans prior to the 1990s, subprime mortgage lenders had a reputation not far removed from pawnshops and slum landlords. Like them most subprime lenders preyed on people who had no alternative and like them subprime lenders often operated on that narrow line separating the shady and the illegal. In 1986 a young man named Sanford Weill grew bored with Wall Street and purchased one of these subprime lenders, Commercial Credit, a loan company based in Baltimore. In his paper "Banking on Misery Citigroup, Wall Street, and the Fleecing of the South," Michael Hudson notes Weill drove employees to sell more. He quotes employee Frank Smith:
Over a period of time, it went from a family, employee-oriented company-doing the right thing, trying to help its customers-to this cutthroat thing of anything that will get us more business. They need the money or by God they wouldn't be at the finance company. They'd be at a bank.
This kind of practice resulted in multiple lawsuits that surfaced in the late 1990s and early 2000s. Hudson cites one example:
Jackson, Miss., attorney Chris Coffer says, he obtained confidential settlements for about 800 clients with claims against Commercial Credit or its successor, CitiFinancial.
Starting with Commercial, Weill began wheeling and dealing until a little over a decade later he would head the largest financial institution in the world.
The Repeal of Glass Steagall
In the background of the go-go economy, the feeling grew among some economists and the financial community that Glass-Steagall hampered America's financial competitiveness. Among the many voices favoring this was Alan Greenspan along with former Goldman Sachs partner Robert Rubin, Bill Clinton's Treasury Secretary. In a 1995 speech and testimony to Congress Rubin signaled the Clinton Administration was ready to repeal Glass-Steagall:
"The banking industry is fundamentally different from what it was two decades ago, let alone in 1933." He said the industry has been transformed into a global business of facilitating capital formation through diverse new products, services and markets. "U.S. banks generally engage in a broader range of securities activities abroad than is permitted domestically," said the Treasury secretary. "Even domestically, the separation of investment banking and commercial banking envisioned by Glass-Steagall has eroded significantly."
Anyone who thinks the repeal of Glass-Steagall was forced on an unwilling Bill Clinton need only read Rubin's testimony.
A year later Sandy Weill set in motion the forces that would finally end Glass-Steagall. Weill proposed the most audacious financial merger in American history: he would merge one of the largest insurance companies (Travelers), one of the largest investment banks (Salomon Smith Barney), and the largest commercial banks (Citibank) in America. The problem was the merger was illegal in terms of Glass-Steagall.
Independent Community Bankers of America CEO Kenneth Guenther captured the audacity of the deal in an interview with Frontline:
Here you have the leadership - Sandy Weill of Travelers and John Reed of Citicorp - saying, "Look, the Congress isn't moving fast enough. Let's do it on our own. To heck with the Congress. Let us effect this." And so they move towards effecting it, and they get the blessing of the chairman of the Federal Reserve system in early April, when legislation is pending. I mean, this is hubris in the worst sense of the word. Who do they think they are? Other people, firms, cannot act like this. … Citicorp and Travelers were so big that they were able to pull this off. They were able to pull off the largest financial conglomeration - the largest financial coming together of banking, insurance, and securities - when legislation was still on the books saying this was illegal. And they pulled this off with the blessings of the president of the United States, President Clinton; the chairman of the Federal Reserve system, Alan Greenspan; and the secretary of the treasury, Robert Rubin. And then, when it's all over, what happens? The secretary of the treasury becomes the vice chairman of the emerging Citigroup.
Weill convinced Greenspan, Robert Rubin and Clinton to sign off on a merger that was illegal at the time, with the expectation that Congress would repeal Glass-Steagall. Charles Geisst, a professor of finance at Manhattan College adds in a Frontline Interview:
Part of [Weill's] deal with the Federal Reserve was to get rid of all Glass-Steagall violations in the new Citigroup within two years. Otherwise, he would have been faced with a divestiture of a company which had just been put together, because of an old law which is still on the books. So it clearly behooved him, and many other people in the financial services industry who wanted to accomplish essentially the same sort of thing in the future, to push to get Glass-Steagall repealed. So they pushed hard? Pushed very hard. … They pushed so hard that the legislation, HR10, House Resolution 10, which became the Financial Services Modernization Act, was referred to as "the Citi-Travelers Act" on Capitol Hill. ..
The Gramm-Leach Bliley Act
The " Citi-Travelers Act" went under the benign-sounding name of the Financial Services Modernization Act of 1999 and, like Glass-Steagall it has become known for the key sponsors of the bill as the Gramm-Leach-Bliley Act, for Republican Senate Banking Committee Chair Phil Gramm, House Banking Committee chair James Leach, and Virginia Representative Thomas Bliley. As the bill took form in Congress, the financial industry, particularly Citibank and Sandy Weill increased the pressure. Charles Geisst notes:
In the year previous to the Financial Services Modernization Act, the thing that overruled Glass-Steagall, Citibank spent $100 million on lobbying and public relations, which is a good indication. Yes. They spent a small fortune, a king's ransom, if you will, getting rid of Glass-Steagall. In fact, when thrown in with other financial firms' lobbying, it was closer to $200 million over the short period of time.
To give you some idea of the magnitude of this effort, the Center for Public Integrity reports
The pharmaceutical and health products industry has spent more than $800 million in federal lobbying and campaign donations at the federal and state levels in the past seven years, a Center for Public Integrity investigation has found. Its lobbying operation, on which it reports spending more than $675 million, is the biggest in the nation. No other industry has spent more money to sway public policy in that period. Its combined political outlays on lobbying and campaign contributions is topped only by the insurance industry.
In other words, in one year Sandy Weill and his buddies spent 1/4 of what the next biggest lobbying effort on record spent in 8 years! In a paper on the repeal of Glass-Stegall in the American Journal of Economics and Sociology Jill Hendrickson wrote:
The Industry's efforts to jump-start progress on the [Senate] bill is a case study in how a well-heeled and well-organized interest group can swiftly prod Congress to move, even on an issue about which most people outside Washington and New York have little knowledge. Nor is it surprising, according to both political science and economic literature, that the interest groups played a vital role in the timing of the 1999 deregulation. Without persistent lobbying by commercial and investment interests it is unlikely that reform would have taken place in this century.
GLB repealed Sections 20 and 32 of the Glass-Steagall Act:
- Section 20 - prohibited any member bank from affiliating in specific ways with an investment bank;
- Section 32 - prohibited investment bank directors, officers, employees, or principals from serving in those capacities at a commercial member bank of the Federal Reserve System.
There was only one problem: the bill had to reconcile differences between the House and Senate versions. The House version differed in two important ways: 1) It took regulatory authority from the Federal Reserve and gave it to the Secretary of the Treasury and 2) it refused to extend to insurance companies obligations under the Community Re-investment Act to provide information about their patterns of mortgage lending.
Democrat Barney Frank was among those who especially opposed the second, telling the BBC
We can we try to do a little bit for those who are being left behind. This is an inappropriate continuation of a pattern of helping those who need a benefit but ignoring those who are left behind.
It was the Community Reinvestment Act provision in particular that threatened to derail the conference committee. Here is the now oft-quoted Frontline description of what happened:
On Oct. 21, with the House-Senate conference committee deadlocked after marathon negotiations, the main sticking point is partisan bickering over the bill's effect on the Community Reinvestment Act, which sets rules for lending to poor communities. Sandy Weill calls President Clinton in the evening to try to break the deadlock after Senator Phil Gramm, chairman of the Banking Committee, warned Citigroup lobbyist Roger Levy that Weill has to get White House moving on the bill or he would shut down the House-Senate conference. Serious negotiations resume, and a deal is announced at 2:45 a.m. on Oct. 22. Whether Weill made any difference in precipitating a deal is unclear.
Frontline's pregnant pause says it all.
What Happened That Night
So why did Well call Clinton, and what did Clinton do? One take comes from a National Housing Institute article by Malcolm Bush and Katy Jacob.
In an unusual move, the three key Republican Chairmen bypassed the usual conference committee debates by writing a "final compromise" themselves. That bill's CRA provisions resembled the original Senate bill. (House Banking Committee Chairman Jim Leach had fought in the House for a bipartisan bill with no anti-CRA measures while Senate Banking Chair Phil Gramm had insisted on the Senate's anti-CRA provisions.)
At this point, tremendous pressure was exerted on the Clinton Administration, which had earlier threatened to veto the Senate version, to sign the legislation, and intense negotiations continued over community reinvestment and consumer privacy provisions.
The Community Reinvestment Act required regulated banks and thrifts to offer loans and banking services throughout their service areas, including lower-income communities. But here is the wrinkle–the CRA essentially served to protect low and moderate income communities from predatory lending–such as subprime mortgages. In 1999, shortly after passage of GLB, National Community Reinvestment Coalition president John Taylor wrote:
We must step up our efforts to identify and eradicate predatory lending. Horror stories abound of minority and low- and moderate-income families losing their homes and wealth due to unfair and deceptive tactics. On a national level, the banking industry increased their subprime mortgage lending from less than 1 percent of all conventional mortgage loans in 1993 to 6 percent in 1998. Our efforts will be to support and promote state and/or federal legislation, similar to that recently passed in North Carolina, that curbs abusive lending.
So we know that the topic of that late night phone call between Bill Clinton and Sandy Weill, the man whose career began in the subprime mortgage business, was the Community Reinvestment Act. We know that Phil Gramm, who was the one most strongly pushing for gutting CRA (Leach actually supported it) threatened to torpedo the legislation if the White House did not reach an agreement.
By the way, Phil Gramm is also currently co-chair of John McCain's Presidential campaign and one of his chief economic advisors. So if you are thinking about voting Republican because of Bill Clinton's role in the repeal of Glass-Steagall, remember that the man whose name is on the bill will probably be in John McCain's cabinet, possibly as Treasury Secretary. Gramm still remains unrepentant about repealing Glass-Steagall. In March Gramm told U.S. News
I see no evidence whatsoever that the subprime problem was in any way caused by making our financial structure more competitive by allowing banks and securities companies and insurance companies to compete against each other. I have seen no evidence whatsoever to substantiate that claim.
So why did Clinton go along? His writings are silent on the subject. He seemingly held the trump card with the threat to veto any legislation that did not meet his approval. And why is it Sandy Weill who makes the phone call to Clinton? Woodward and Bernstein where are you when we need you?
At this point not enough evidence is available to finally connect the dots, but whatever it is, it cannot possibly benefit Bill Clinton. Were the fingers of the leaders of both parties not all over this bill, you would hope a contemporary version of Senator Pecora might investigate the entire matter, but that will probably never happen. For those who believe Wall Street now calls the tune in this country, the story of the repeal of Glass-Steagall certainly fuels their paranoia.
Troubling Sections of GLB
The most troubling aspect of GLB is not only did it repeal Glass-Steagall but it did so in an especially aggressive way that purposely weakened many enforcement provisions, some of them so obscure most of the public is not aware of them. For example:
Governance of the Federal Home Loan Banks is decentralized from the Federal Housing Finance Board to the individual Federal Home Loan Banks. Changes include the election of chairperson and vice chairperson of each Federal Home Loan Bank by its directors rather than the Finance Board, and a statutory limit on Federal Home Loan Bank directors' compensation.
Other provisions:
Provide for a "jump ball" rulemaking and resolution process between the SEC and the Federal Reserve regarding new hybrid products. Grants regulatory relief regarding the frequency of CRA exams to small banks and savings and loans (those with no more than $250 million in assets). Small institutions having received an outstanding rating at their most recent CRA exam shall not receive a routine CRA exam more often than once each 5 years. Small institutions having received a satisfactory rating at their most recent CRA exam shall not receive a routine CRA exam more often than once each 4 years.
The most troubling section, though, is Section 108, titled USE OF SUBORDINATED DEBT TO PROTECT FINANCIAL SYSTEM AND DEPOSIT FUNDS FROM ''TOO BIG TO FAIL'' INSTITUTIONS. It provides for a study of:
The feasibility and appropriateness of establishing a requirement that, with respect to large insured depository institutions and depository institution holding companies the failure of which could have serious adverse effects on economic conditions or financial stability, such institutions and holding companies maintain some portion of their capital in the form of subordinated debt in order to bring market forces and market discipline to bear on the operation of, and the assessment of the viability of, such institutions and companies and reduce the risk to economic conditions, financial stability, and any deposit insurance fund.
Note the language of this section. For the first time in the history of the American economy certain financial institutions are being judged "too big to fail." Think about the implication of that. A company now has such power and influence that the government cannot allow it to fail. This is corporate welfare at its worst. If a company gets to a certain size we will designate it "too big to fail." How would you like your home to be designated too big to fail or your job?
This language as much as any other speaks of the end of the ideals that powered the new Deal.
After GLB
After the passage of GLB, the subprime market took off as if someone had attached a booster rocket to it. If anyone has doubts about Sandy Weill's connections between GLB and the subprime market, just a year after the passage of the bill repealing Glass-Steagall, Citigroup had become the number one subprime lender in the country. Its vehicle for this was the newly formed CitiFinancial. Although he now was one of the wealthiest people in the world, some things had not changed for Sandy Weill since he bought Commercial Credit. CitiFinancial continued many of his original firm's aggressive practices. Michael Hudson notes:
In 1999, the company agreed to pay as much as $2 million to settle a lawsuit accusing Commercial and American Health & Life of overcharging tens of thousands of Alabamans on insurance. Beasley, Allen, claim[ed] nearly 1,500 clients in Alabama, Mississippi, and Tennessee who had Commercial Credit or CitiFinancial loans.
Hudson notes Weill was especially enthused about the possibilities the repeal of Glass-Steagall had created:
Weill enthused about blending diverse units and creating opportunities for "cross selling," which allows affiliates to market each other's products. Primerica boasts more than 100,000 agents who can not only sell life insurance but also steer loan applicants to the parent's subprime operations. In Weill's vision, he'd created "a walking, talking bank."
Not long after Hudson wrote his article and Weill made that statement, the subprime crisis hit America. While there are too many theories to go into here, one notable explanation comes from the Federal Reserve System itself. In a paper for the St. Louis Federal Reserve System, Souphala Chomsisengphet and Anthony Pennington-Cross point out:
The growth of subprime lending in the past decade has been quite dramatic. Using data reported by the magazine Inside Lending, Table 3 reports that total subprime originations (loans) have grown from $65 billion in 1995 to $332 billion in 2003. The structure of the market also changed dramatically through the 1990s and early 2000s…For example, the market share of the top 25 firms making subprime loans grew from 39.3 percent in 1995 to over 90 percent in 2003. Many firms that started the subprime industry either have failed or were purchased by larger institutions.
Meanwhile a few voices began to openly wonder if the repeal of Glass-Steagall had fueled the crisis. Thomas Kostigen of Marketwatch wrote
Glass-Steagall would have at least provided what the first of its names portends: transparency. And that is best accomplished when outsiders are peering in. Glass-Steagall forced separation. Something like it, where conflicts and losses can be mitigated, should be considered again.
Financial Week headlined, "Glass-Steagall Wasn't Such a Bad Idea After All." The article stated:
The credit crisis now afflicting the corporate debt and stock markets suggests Congress should revisit the work it did in 1999 that is at the root of much of today's troubles. That's right: It's time to rethink the Gramm-Leach-Bliley Act, otherwise known as "Sandy's Law" (after then-Citigroup chief executive Sanford "Sandy" Weill), which nailed shut the coffin of the Glass-Steagall Act of 1933.
Did the Repeal Contribute to the Mortgage Crisis?
So are these sources right? From an obvious, common-sense point of view they are. Had Glass-Steagall been in place Citigroup could not have formed CitiFinancial and Bear Stearns would not have needed a bailout. Many in the financial community believe the repeal of Glass-Steagall did contribute to the financial mess we are in. Scott-Cleland, founder and CEO of the Precursor Group, a research boutique for institutional investors, told Frontline
The repeal of Glass-Steagall was an important contributor to the bubble. Well, it added to the frenzy. It added to the investment banking fervor. It added to the amount of money that was staked on this. Essentially, you had a bigger shoulder pushing that rock up the hill.
Former SEC Chair Arthur Levitt is another who worried about the repeal of Glass-Seagall:
The merger of investment bank and commercial bank interests has created conflicts of interest that clearly hurt the public investor. Only extraordinary activity by both the banking and security regulators can begin to address [the] issue.
But what about Gramm-Leach-Bliley helped to fuel the crisis, for it is easy to say that if banks had not been involved in securities we would not be facing the mess we are in. Curiously one of those converts is none other than Robert Rubin who has stated
If Wall Street companies can count on being rescued like banks, then they need to be regulated like banks.
Since it was Rubin who played a major role in the deregulation this statement is nothing short of incredulous. As the record shows, Rubin had a great deal to regret. When the mortgage crisis began to unravel, several of the changes in Glass-Steagall and several of the new provision in GLB came into play.
First, because of changes in the Community Reinvestment Act, banks no longer were examined closely. Had bank examinations continued in the fashion they had before GLB, they might have provided a warning of the crisis.
Second, in what is called the "sunlight provision" that was added to the CRA portion of GLB, 501c3 organizations that had worked as watchdogs to insure that banks followed the law were put under more scrutiny than the banks themselves.
Third, Section 20 of Glass-Steagall was gutted by Alan Greenspan's ruling. LB buried it for good. Bill Clinton could have confronted Greenspan over his order or opposed the repeal of Section 20, but chose not to. The repeal of Section 20 enabled big players like Citi to gobble up the smaller banks covered by CRA. Depending on how the acquisition was structured, those newly-acquired smaller banks now came under the new liberal examination rules of GLB.
Fourth, in emphasizing the impact of the repeal of Glass-Steagall it is important to note that GLB repealed TWO of Carter Glass' four sections: Section 20 and section 32. Much emphasis has been placed on Section 20, but Section 32 may be equally or more important in the current crisis because it forbid interlocking directorships. The repeal of Section 32 allowed interlocking directorships that made policing and unraveling the crisis like untangling a fishing reel backlash.
Fifth, the "Too Big to Fail" section of GLB–an idea that both William Jennings Bryan and Carter Glass would have found reprehensible–changed the business playing field in America for good. For all their worship of "the market," the Republican Counterrevolutionaries had in one stroke of a pen made the market irrelevant for the likes of Bear Stearns.
Sixth, Glass-Steagall required member banks to keep a percentage of their deposits in reserve to cover a bank run. That percentage was sustantially changed in GLB so in the event of a crisis like Bear Stearns, the funds to cover the disaster were inadequate.
The Key to it All
GLB created a financial Brave New World where institutions have become "too big to fail," even if they skirted or even violated regulations and the financial entanglements of banks, investment companies and insurers have become difficult to sort out and virtually impossible to regulate. The reason TBTF has placed the United States economy at risk is perhaps best stated by Ed Mierzwinski at the U.S. Pirg Consumer Blog:
The reason for the bailout, from the regulator point-of-view is simple: everything is now connected to everything else. Regulators thought that the interconnected economy would absorb and diffuse risks. Instead, these interconnections and use of exotic financial instruments no one understands - coupled with the moral hazard created by the repeal of Glass-Steagall, which allows would-be lords of the universe on Wall Street (their term, not mine) to play with taxpayer-insured deposits at commercial banks - has force-multiplied local or individual financial problems into world-wide financial crises.
So now we find ourselves in the midst of a Presidential campaign in which the chief financial advisor to one candidate authored the bill that repealed Glass-Steagall and another candidate's husband acquiesced in the deal. The third candidate has already stated he would not reinstate Glass-Steagall. When asked if he would restore Glass-Steagall Barack Obama notes
Well, no. The argument is not to go back to the regulatory framework of the 1930's because, as I said, the financial markets have changed substantially.
I would be remiss by not adding four of Obama's top six contributors include Goldman Sachs, J.P. Morgan and–guess who–Citigroup.
None of this promise the next four years will be any easier on the American consumer. And meanwhile I am still waiting after six months for some reporter to ask Hillary Clinton what she thinks of her husband's repeal of Glass-Steagall and whether she would favor rolling it back.
The reason for the silence may be that for the Clintons the repeal of Glass-Steagall may prove far more embarrassing in the long run than Monica Lewinsky.
Posted by: liberalamerican
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If Weill did any due diligence at all, he knew quite well he was buying a company whose entire existence was predicated on ripping off people of color. Commercial already had a shady reputation when Weill moved in on it. In 1973 the FTC had issued an order demanding Commercial cease using deceptive and hardball tactics to entrap those in search of a loan. In his article "Banking on Misery Citigroup, Wall Street, and the Fleecing of the South," Michael Hudson relates that Weill's assistant, Alison Falls, was appalled at the idea of buying Commercial:Hey guys, this is the loan-sharking business. "Consumer finance" is just a nice way to describe it.
After Weill bought the company did he seek to curb these practices? Quite the contrary, Commercial became even more aggressive. After all, Weill's whole business plan was predicated on using Commercial to launch a larger company and in order to do that he had to get as much as he could out of Commercial, which meant squeezing clients even more.
Some of Weill's former employees tell stories of being pressured into steering clients into dubious deals. Hudson quotes Sherry Roller vanden Aardweg, who worked for Commercial in Louisiana from 1988 to 1995. She agrees there was "a tremendous amount of pressure" to sell insurance: That insurance was issued by another Weill acquisition American Health & Life.
We kept adding insurance that we could offer. It just kept growing. It was beginning to get a little bit ridiculous.
Frank Smith, who worked for Weill in Mississippi, put a perspective on ripoffs such as "closed folder closings" in which documents adding to the cost of the mortgage were kept from the client:
They need the money or by God they wouldn't be at the finance company. They'd be at a bank.
Weill used the money milked from Commercial's clients to acquire insurance and finance company Primerica. In 1990 he acquired Barclay's Bank. Meanwhile the stories told by African Americans victimized by Weill certainly sound like loansharking. Two Mississippi clients of Commercial signed on for Annual Percentage Rates (APR) of 40.92 and 44.14. Another client paid $1,439 for insurance on a $4,500 loan.
Ripoffs like this attracted the attention of attorneys and law enforcement officials, especially in the South, where Commercial had a large presence. Hudson reports:
In 1999, the company agreed to pay as much as $2 million to settle a lawsuit accusing Commercial and American Health & Life of overcharging tens of thousands of Alabamans on insurance.
Jackson, Miss., attorney Chris Coffer says he obtained confidential settlements for about 800 clients with claims against Commercial Credit or its successor, CitiFinancial.
In 1999, the company agreed to pay as much as $2 million to settle a lawsuit accusing Commercial and American Health & Life of overcharging tens of thousands of Alabamans on insurance.
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NYT
Sandy Weill, former chief poohbah of Citigroup, tells us that he had nothing to do with the implosion of the sprawling behemoth. Everything he did was right, it was his successor, Chuck Prince, who screwed up (well maybe he was an itty bitty bit responsible by virtue of recommending Prince). Oh, and it's Jamie Dimon fault too for being so pushy about succession.
Now in fairness, the story about Weill at the New York Times does give a bit of color to the problems Citi has had, and why they might indeed be attributable to Weill. But this is still a case example of the dangers of the Times' notion of "fairness". "Fair" in American media means you tell both sides of the story. But what if some of the arguments made on one side are rubbish? Yes, both sides no doubt have a case to make, but don't media outlets like the Times at least have a duty to make sure that the arguments presented are valid?
First object lesson:
"Sandy will forever be identified with Citigroup," says Michael Armstrong, a Citi board member and a former chief of AT&T. "He put everything he had into its creation."
Yves here. Lordie. Anyone with an operating brain cell will hopefully know to discount the praise of a former board member (translation: someone who got cash and perks directly from Sandy and is thus hardly objective). But Armstrong is a special case. Michael Armstrong was one of the most overrated CEOs in the history of America, and that takes some doing. He was straight out of central casting. He did $105 billion of cable acquisitions, and the only way the math would work was if you delivered telephony via the acquired cable operations. He had committed to doing it in two years, when the needed technology (voice over internet protocol) at that juncture had never been deployed outside a lab. Oh, and if you did somehow figure out how to scale the technology, you'd also need to increase the number of installation staff (and I don't mean those call center people, I mean the kind who come to your house with equipment attached to their belt) by 50% in that timeframe. My moles (professionals serving AT&T top brass who are on a first name basis with corporate psychopathy) told me that the backstabbing and intrigue at AT&T corporate made the French court look good. I told everyone I knew in May 1999 to sell AT&T. No one listened.
That is a long-winded way of saying an endorsement from Armstrong isn't just meaningless, it's a negative indicator.
But this is the part that frosts my cake, where the Times itself repeats Weill PR uncritically:
Mr. Weill built his wealth, status and power by creating what was once the world's largest bank
The headline picks up that theme: "Citi's Creator, Alone With His Regrets." And as we will see later, his regrets are very thin indeed.
Even though this is merely the subtext of the article, it positions Weill. And various studies have found that the more importance you ascribe to someone's role, the more favorably they are judged (people correctly allow for a degree of difficulty factor).
This is utter bullshit, and I am tired of corporate conglomerateurs being called "creators" or "builders". You may not like what Sam Walton or Bill Gates created, but their achievements are of a completely different order and have held up better as companies than those of Weill.
And most important, he is inaccurately being given credit for Citibank, later Citicorp, which at the time of the Citigroup-Travelers deal, came out on top, and John Reed rather than Weill was presumed to be the eventual chairman. But Weil mounted a successful coup.
I had Citibank as a client in the 1980s, and even though it was a mess even then, it was an impressive and intriguing mess, like an extremely accomplished actor that regularly goes on binges and tears up hotel rooms. The bank had people who were on average considerable brighter and more energetic than the the commercial banking norm, and also pretty meritocratic by the standards of that era (if you were a minority, a foreign national, or female, Citi was a better career bet than most other places). It was reflexively innovative (not that that made an ounce of strategic sense, Citi would spend the time and money to innovate, and in particular, break new paths on the regulatory front, and the fast followers would get much of the advantage of Citi's efforts at a fraction of the cost). Citi created the interest rate and FX swaps businesses, and John Reed came to prominence by computerizing Citi's operations, a massive task (and Citi was a path-breaker again, well ahead of its peers). But the place was freewheeling for a bank and thus in a good bit of disarray. The fact that it reorganized every two years or so was no help (one of the side effects was that it was in many cases well nigh impossible to track the performance of businesses and products over time).
And it was Walter Wriston, not Weill, who had the vision of the Citi that eventually came to be. Wriston saw Citi as a globe-spanning enterprise, with a bank offering financial products of every type to every imaginable customer. His early 1980s strategy was "Five Is": Institutional Banking, Individual Banking, Investment Banking, Insurance, and Information. Even then, he wanted to be not just in insurance and investment banking, but information based services (and not just Bloomberg imitators; one would have restructured the international trade business, but politics within McKinsey undermined it when the folks at Citi were keen to move it forward).
In other words, Weill and his backers exaggerate his role considerably. Weil was a very talented deal guy, with a real nose for value, a tough negotiator who was far more disciplined than most in his field. He developed a detailed protocol for integrating acquired companies, a critical task that eludes most buyers. So his accomplishments within that field were quite impressive, and he should be given his due there (reader no doubt know that every study every done has found most acquisitions fail, as in destroy value).
Now despite puffing Weill up more than he deserves, the piece reads like an artfully drafted reference letter, where the writer actually is not that keen about the candidate, but uses a deliberate disconnect (say enthusiastic tone versus little substance) to signal his ambivalence. Thus Sandy fans may think the piece was pretty favorable, while a more detached reader could come away with a different take.
Let's look at some of the substance:
"The dream, the mirage has always been the global supermarket, but the reality is that it was a shopping mall," says Chris Whalen, editor of The Institutional Risk Analyst, of Citi's evolution over the last decade. "You can talk about synergies all day long. It never happened."
Citi's troubles are well chronicled: a failure to integrate its disparate parts worldwide or to keep tabs on risky investments and free-wheeling operations.
Yves here. These problems were intrinsic to Wriston's vision, but they got worse and worse as the bank got bigger and bigger. Back to the piece:
And Mr. Weill vigorously defends his record, rebutting critics who say that Citi was an unstable creation.Judah Kraushaar, a hedge fund manager and former banking analyst who worked with Mr. Weill on his autobiography, said that Citi's problem wasn't that it was unmanageable, but that it lacked enough good managers - and that Mr. Weill was a good manager.
"When he left, the company had all the hallmarks of how Sandy ran a business: it was lean; it didn't have a bloated balance sheet," says Mr. Kraushaar. "Had he picked a different successor things could have turned out very differently."
Yves here. The use of this quote, in context, comes off as a subtle bit of hatchet work, since it creates the impression that it is hard to come up with objective sourcesthat are positive about Weill's record. Note the first was Armstrong, who is beholden to Weill. Kraushaar is also in his orbit.
The article does have lots of sympathy building patter:
One wall is devoted to framed magazine and newspaper articles chronicling his career. A Fortune magazine clipping from 2001 declares Citi one of its "10 Most Admired Companies."
On another wall hangs a hunk of wood - at least 4 feet wide - etched with his portrait and the words "The Shatterer of Glass-Steagall." The memento is a reference to the repeal in 1999 of Depression-era legislation; the repeal overturned core financial regulations, allowed for the creation of Citi and helped feed the Wall Street boom.
Elsewhere in Mr. Weill's office, a bust honors him as Chief Executive magazine's "C.E.O. of the Year" in 2002. There are pictures of him with world leaders like Nelson Mandela, Bill Clinton, Vladimir Putin and Fidel Castro. There is also one of his humble childhood home in Brooklyn - a reminder of how far he has come.Elsewhere in Mr. Weill's office, a bust honors him as Chief Executive magazine's "C.E.O. of the Year" in 2002. There are pictures of him with world leaders like Nelson Mandela, Bill Clinton, Vladimir Putin and Fidel Castro. There is also one of his humble childhood home in Brooklyn - a reminder of how far he has come.
Yves here. This sort of thing puts me off, but I imagine some take it at face value. And we have this:
Starting in late 2007, he began approaching some members of Citi's board about returning to help with its recovery. He tried first when the board was looking to replace Mr. Prince as C.E.O., and later after Vikram Pandit got the job. At the time, Mr. Weill imagined that he would be welcomed. "I had 50 years of experience," he says. "I think I was a pretty good student of the markets, and the business. I had a good feel of things. I felt that just because I retired didn't mean my brain went to mush. Maybe I could help."
No one responded to his offers.
The rejection stung. Citigroup had for so long been central to his life. It was hard to accept that he had no control or influence over it anymore. "It's very hurtful. Even though he says, 'No, no, it's fine,' "says Joan Weill, his wife of 54 years. "I know him. The company means so much to him. It was his baby."
Yves here. The idea that he'd be welcomed back when the bank was in crisis strikes me as delusional, since the story gives no indication that he was still close to the movers and shakers at the bank (that sort of thing happens seldom, most often when board members are still in close contact with the old CEO) but again, there could be more to this that the NYT presents.
The story also gives his defense of his use of a Cit private plane to go on vacation in Mexico (he was permitted use as part of a deal to terminate a consulting contract). He was unhappy at being depicted as an out-of-touch banker…but this is a man worth hundreds of millions of dollars who IS an out of touch banker! Even though he was entitled to use the plane, this was a tone deaf move. And per our opening comment, Weill does not admit error:
Mr. Weill says that the model on which he built the company was not at fault, that it was the management that failed. For this, he accepts partial responsibility.
"One of the major mistakes that I made was my recommending Chuck Prince," he says of his handpicked successor, who ran the company from 2003 to 2007. Mr. Weill blames Mr. Prince for letting Citi's balance sheet balloon and taking on huge risks.
Yves here. Please, this is NOT taking responsibility. This is the BS that MBAs are taught to dole out. "Tell me your biggest fault." Standard reply; "I am too competitive." Even better: "I am too hard on myself." Earth to base, or in this case, New York Times: Blaming Chuck Prince and claiming that it is "a major mistake" is NOT accepting responsibility, it is an acceptable way to assign blame. Back to the story:
In addition to initially supporting Mr. Prince as C.E.O. - even though Mr. Prince had never run a bank - Mr. Weill also pushed out Jamie Dimon, a well-regarded banker who now runs JPMorgan Chase. And Mr. Weill personally recruited Robert Rubin to Citi after Mr. Rubin stepped down as Treasury secretary. Mr. Rubin, who has since left Citi and declined to comment about his tenure there, has been criticized as failing to help rein in the bank's excesses.
Mr. Weill says he has no regrets about hiring Mr. Rubin and wishes that things with Mr. Dimon had worked out differently.
The story ends on a mixed note:
Analysts say that managerial problems plagued the Citi empire and that its board, which might have imposed some order, became little more than a rubber stamp during the Weill era. "Sandy surrounded himself with yes men," says Mr. Whalen. "He never wanted anyone second-guessing him."
THESE days, Mr. Weill keeps busy with charities and his personal investments…
Such giving shows that Mr. Weill remains in far better shape than most other Citi investors. Although Forbes bounced him from its list of the 400 wealthiest Americans - the magazine once estimated his net worth at $1.5 billion - he still lives regally: a $42 million apartment in Manhattan; homes in Greenwich, Conn., and the Adirondacks; and a yacht.
Citi, meanwhile, has recently shown some signs of improvement….But for so many who depended on Citi, the bank has caused irreversible damage. It's a reality that Mr. Weill says pains him.
"Look what it's done," he says. "It's hurt the dreams of so many people."
Notice the distancing: "it's done…it's hurt". It must be nice never to have to say you were one of the perps.
Selected Comments
Ted K:
Robert Rubin was the smartest one in the group from a self-serving perspective. Notice he just keeps his damn mouth shut. I might be surprised to find out the facts, but it's also worth noting I've never heard Rubin's name mentioned among the CEO's who had their personal net worth demolished by the crisis.
IF
Being from Eastern Europe I really liked how the South African truth commissions worked.
In Eastern Europe most apparatchiks (sans Ceausescu) got away or even thrived with their old connections after messing up the country.
Now, South Africa is a very different case – and how would asking people to say they are sorry to be enriched bastards change the way the US works?
I am afraid the only workable solution is jacking up the top tax brackets. As the financial industry has been shown to work around narrowly focused laws (see salarized stock under http://blogs.reuters.com/felix-salmon/2009/12/30/how-feinberg-set-executive-pay/ ), these taxes have to be broad and unfortunately discourage people like Tiger Woods and Bill Gates from innovating further. (Wonder how Robert McNamara got motivated at Ford under the high taxes in the 50s.)
The urgency of the crisis has evaporated. I can see how the current mess can continue for years and become the new norm. Nothing revolutionary can be expected of Obama. But maybe, just maybe, the public discourse will get to the point that somebody but the Federal Reserve will have to take care of this mess. But who knows? Argentina and Venezuela will happily welcome the US in the club of failed states.
Richard Kline:
Sandy's touting himself for a job, sounds to me. And why not?: There's going to be continued consolidation at the top of the mega-financials, and the US Guvmint's footing allllllll the bills. Sandy's saying, "I've got clean hands, and a good record; it's the schlubs I left running the shop that pancaked. I'll make you some money."
Regarding higher top tax brackets, well yes, a fine idea; so's belling the cat. Who's going to do either? We had a soft coup in the Us fifteen months ago when the alpha financials took over the Federal government and annexed the tax receits from here to whenever to stabilize their wealth. Nothing has changed in that regard whatsoever in the time since. Government policy is drafted on Wall Street and there's not the slightest indication that that will change in the next three years, and little beyond that. Not to sound pessimistic, but there's no change on any horizon because too few want any change. Even the sight of themselves being robbed and jobbed can't get the citizenry of the country off their sofas.
The Weills and Rubins of the world have nothing to fear, not as along as an inept madmen trying to light his skivvies on fire gets more press than the theft of the country by a tiny group of failed oligarchs.
Jim in SC:
The business with the 92nd St. Y and Jack Grubman's kids' pre-school application tells a lot about Sandy Weill. He, of course, denies a quid pro quo with Grubman over Grubman's rating of AT&T to influence Michael Armstrong to vote with Sandy Weill against John Reed. The whole sordid story also tells a lot about how crazy New York City is regarding getting your kids into the 'right' school. It's nuts!
But this is still a case example of the dangers of the Times' notion of "fairness". "Fair" in American media means you tell both sides of the story. But what if some of the arguments made on one side are rubbish? Yes, both sides no doubt have a case to make, but don't media outlets like the Times at least have a duty to make sure that the arguments presented are valid?
By now they do NOT believe this. On principle, where reporting on what any establishment figure has said, they believe they have no obligation to separate fact from fiction or solid arguments from obvious crap.
Several have explicitly said so, from the WaPo and elsewhere. While I don't recall anyone from the NYT actually admitting (let alone proudly avowing, as the WaPo does) that, it's clear from much of the "reportage" on business, on health "reform", on the op-ed and elsewhere, that they practice it.
First object lesson:
"Sandy will forever be identified with Citigroup," says Michael Armstrong, a Citi board member and a former chief of AT&T. "He put everything he had into its creation."
Yves here. Lordie. Anyone with an operating brain cell will hopefully know to discount the praise of a former board member (translation: someone who got cash and perks directly from Sandy and is thus hardly objective). But Armstrong is a special case.
I still remember how, during the thick of the Rep campaign, the op-ed page saw fit to print a piece written by a Romney crony, his college roommate or something, whose entire "argument" boiled down to, "Mitt's a friend of mine, and I've always known him to be a great guy, so therefore nothing bad anyone's saying about him could be true, and he'd make a great president".
Forgot to add this:
"Look what it's done," he says. "It's hurt the dreams of so many people."
Notice the distancing: "it's done…it's hurt". It must be nice never to have to say you were one of the perps.
That's what I call "criminalspeak", because whenever I used to watch a documentary like "The Big House", and they'd interview some lifer in for murder, he'd NEVER say something like "I shot and killed someone."
Rather it would invariably run like this:
"There was this guy, and there was an argument, and there was a gun, and the gun went off, and the guy got shot, and the guy died.."
Always this passive voice, just expressing the point of view of a passive observer who got swept up in something beyond his control.
This, of course, is the official line of all these finance criminals, and every defender of wingnut welfare they have in the media and politics.
Magi de Vallemont:
Great analysis, Yves, thanks. It's incredibly important to look for these very subtle tendencies in the MSM, sadly specifically the N.Y. Times, to white-wash the main players in the big banks.
Independent Accountant :
I have viewed Citigroup as a mismanaged piece of junk since about 1982. Absent the Fed's tilting the yield curve, it would have failed in about 1987. I see Walter Wriston as one of the most incompetent bankers in history.
Happy New Year YS!
jazzman:
i think a lot of people have failed to realize that Mr. Weill was shown the door when he so-called retired..Jack Grubman gave him up to Spitzer for a better deal, and Sandy was uncerimoniously told to take the next stage out of town or face the legal consequences..
in revisionist history, he was an innovator who patched together the financial mess know as Citigroup and for many years the wheels stayed on the train..But alas, wall st. is a boom and bust world and the wheels finally came off..
Rubin helped considerably with Glass-Steagall and also probably helped in giving Sandy safe passage out the door, but Rubin was an abysmal failure in the day to day stuff and was absent and mute when it came to plugging the holes..
Jamie found success at JPM but he too was beaten up by the Russian meltdown in the mid nineties and his thirst for power..
no one gets a good grade in this mess and now we have a stub of a company with many of its most talented people gone, and everyrone praying for a monumental rally back to the $5 price which is still 95% under its multi-yr high.."Uneasy lies the head that wears the crown"
LeeAnne:
Thank you. And I'd love to know the name of Sandy's public relations people –his name rarely if ever appears on the list of finance deregulation culprits.
Francine McKenna:
First, I agree with your critique of the piece and the sickening non-objective, fawning, promotional aspects. If the reporter did not want to write some of those things and tried to add in some subtle subtext, then some editor or someone else surely wanted this piece done to pay off a chit.
I spent some time last night reviewing the latest dust-up over at the New York Times over some freelancers who took expenses and perks and did understand or adhere to contracts that forbid such things, even when not on a NYT assignment. http://twitter.com/Penenberg/statuses/7320255199
The holier than though, sanctimonious crap that I saw on Twitter about "fairness" and "objectivity" and never taking anything from anyone who may someday, in your wildest dreams, be a source reminded me of a bunch of church ladies. Those freelancers should have read and probably never signed those unconscionable contracts and NYT needs to get off its high horse and admit they are overly dependent on content they don't want to pay the full load for. Something for nothing never is…
The idea that any of these major media staff reporters can be truly fair or objective as an organization, (I do not indict anyone as individuals since many hold on to their integrity until the last breath or layoff) is ludicrous.
The Weill piece is PR puff on the latest financila crisis to add to Weill's clipping folder before it's too late and he can't put his own two cents. That's not only disingenuous but criminal. Who's next week? Jack Welch blaming Immelt for GE's recent fines for accounting manipulation? Oh wait, Harvard Business Review has set that one up for next month. http://blogs.hbr.org/hbr/hbreditors/2010/01/the_decade_in_management_ideas.html
When some accuse me of bias in my writing about the Big 4 audit firms, I say, " Damn right!" After twenty-five plus years in the business, I'm entitled (and you are too, Yves) to my opinion and my biases and you can take it or leave it.
attempter:
Yeah, this morning I dashed off an e-mail to their stupid "public editor" who was blathering on about those nasty, unethical freelancers.
I really think a jackass like that doesn't even understand that writing relentlessly favorable and ideologically slanted "reportage" about corporations and sectors upon whose advertising you rely is an infinitely greater conflict of interest than anything they're beating up on the freelancers about.
The other day Yves linked to a piece about a study on how the nabobs demand that the little people live up to "morals" and "ethics" which they themselves never live up to and never intend to live up to.
Once again we're seeing that, this time with the streetwalking corporatist "NYT".jake chase:
Yves Smith:
- Sociopaths never have regrets.
- Putting Walter Wriston on a pedestal is as absurd as worshipping Sandy Weil.
- To actually write something like
"The bank had people who were on average considerable brighter and more energetic than the the commercial banking norm, and also pretty meritocratic by the standards of that era (if you were a minority, a foreign national, or female, Citi was a better career bet than most other places). It was reflexively innovative (not that that made an ounce of strategic sense, Citi would spend the time and money to innovate, and in particular, break new paths on the regulatory front, and the fast followers would get much of the advantage of Citi's efforts at a fraction of the cost). Citi created the interest rate and FX swaps businesses…." only proves you are still drinking the cool aid.
- What financial services created over the past thirty years is simply an unmitigated disaster. There is nothing positive about any of it, and in a just world all the prime enablers would be stripped naked and imprisoned as guilty until proven innocent.
5. It is not a plus that the bank provided equal opportunity to amoral careerists of all races, genders, nationalities, even if this is true, which I doubt.
I'm not putting Wriston on a pedestal. But if you believe that the Citigroup that resulted was an accomplishment, the credit goes to Wriston for that vision, not Weil.
As for Citibank circa 1983, were you in the banking business back then? Citi's staff was smarter than that of most banks (McKinsey had a very active banking practice even then). I said that Citi's "strategy" of knee jerk innovation operated much more to the benefit of fast followers than Citi , and its frequent reorgs make reporting and accountability difficult. Those are indictments.
It seems you want a black or white treatment, when just about everything in life does not lend itself Manichean characterizations.
François:
"Je ne regrette rien"
Non -- Rien de rien
Non -- Je ne regrette rien
Ni le bien qu'on m'a fait
Ni le mal tout ça m'est bien égal --
Non -- Rien de rien
Non -- Je ne regrette rien
C'est payé, balayé, oublié
Je me fous du passé --
Avec mes souvenirs
J'ai allumé le feu
Mes chagrins, mes plaisirs
Je n'ai plus besoin d'eux --
Balayées les amours
Et tous leurs trémolos
Balayés pour toujours
Je repars à zéroNon -- Rien de rien
Non -- Je ne regrette rien
Ni le bien, qu'on m'a fait
Ni le mal, tout ça m'est bien égal --
Non -- Rien de rien
Non -- Je ne regrette rien
Car ma vie, car mes joies
Aujourd'hui, ça commence avec toi --
Edith Piaf, as you know.Dikran:
The wrong guy won. John Reed was head and shoulders over Weill. Weill is a kazar. He fixed his retirement package so he would not have to pay income taxes. Never a leader. No wonder he is lonely, he got what he worked for but no respect.
Thomas Barton:
Yves, excellent article and a fine jumping off point for some email based commentary delivered to you from your citi insider buddies. Nail this clown to the wall with his own words and memo subjects in the 2000 to 2003 timeframe.
baruch deutsch:
i jumped tru loops from lehamn to go to work for sandi at smith barney. when he + his colonels needed you they did anything for you. i went to f/x part of commodities division in 1996.when sandi took over salomon we were forgotten stepchieldren. at the city takeover we barley existed. Sandi s major problem was that he only cared about himself – always. the minute he did not need you- he forgot you. You can not run a business like that. Also as you so well talk about in the article- taking responsibility only for winners is not a great long term asset. I dare say as a soldier of Sandi – he was the worse Leader I experianced on the street .He deserves seating in jail – for the misery he brought on hundred of thousands of workers.
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Nov. 20, 2002 | Slate MagazineHow Citigroup's CEO rewrote the rules so he could live richly.
In 1933, two events occurred that would transform the world of finance. The first was known to be important at the time: In the wake of the 1929 stock-market crash, Congress passed the Glass-Steagall Act, which erected what became known as the "Chinese wall" between commercial banking and investment banking. The other event went unnoticed: In Brooklyn, Sandy Weill's mother gave birth to the future Citigroup CEO. Neither the congressmen celebrating their new legislation nor Weill's undoubtedly happy Polish-immigrant parents had any reason to suspect a connection between the two, but their fates would be intertwined. A sort of financial cage match between Glass-Steagall and Weill had commenced: Two go in; only one comes out.
In the end, Weill would win-he outlasted Glass-Steagall, and tore down the wall between commercial and investment banking, but his victory could prove to be his undoing. Thanks in large part to Weill's influence, Glass-Steagall was repealed in 1999. The change allowed commercial and investment banks to merge and sanctioned the creation of one-stop financial supermarkets such as Weill's Citigroup, which is a brokerage, a bank, and an insurance company all in one. Weill has reaped a massive financial reward as a result, but he's also gotten into a great deal of trouble.
Over the past week, Weill has been in the headlines for an alleged quid pro quo he worked out with Jack Grubman, involving the admission of Grubman's daughters to an elite Manhattan nursery school (yes, such things exist). The part of the story that's most damning to Weill: He has admitted to telling Grubman, a star telecom analyst at Citigroup's Salomon Smith Barney subsidiary, to "take a fresh look" at AT&T's stock rating. What Weill had to gain from leaning on Grubman is unclear-he may have wanted to encourage AT&T to let Salomon underwrite its upcoming wireless IPO. Or, as Grubman later wrote in an e-mail he now disavows, Weill may have needed AT&T CEO C. Michael Armstrong's vote to oust the Citigroup co-chairman, John Reed-allowing Weill to take sole control of the company.
But more sedate headlines are probably more important, if less delicious. Citigroup faces federal, state, and industry investigations for a host of allegations that stem from the conflicts of interest that have emerged in the very post-Glass-Steagall world Weill helped create: hyping the stocks of lackluster companies in order to rake in those companies' IPO business; using loans as loss leaders to encourage companies to give Citigroup their investment-banking business; helping Enron and WorldCom conceal their massive debts; "spinning" rocketing IPO shares to executives in exchange for business from the executives' companies. Allegations such as these are particularly dangerous, because they encourage small investors to lose faith in the stock market in two ways: by demonstrating that powerful inside players have an unfair advantage in the market, and by leading them to believe (rightly, of late) that the information investors receive from stock analysts and company audits cannot be trusted.
Weill is unaccustomed to the role of business villain. For most of his career, he has been a Wall Street hero-his life story conforms nicely to the template that the business world prefers for its icons: a self-made dealmaker who, by dint of a world-transforming vision, rose from humble origins to become a Wall Street titan. In Weill's case, his vision was to build a financial-services company that could cross-sell a broad variety of financial products-stocks, credit cards, checking accounts, insurance, loans, whatever its heart desired-to its customers. When Weill merged Travelers with Citibank to form Citigroup in 1998, he stood on the brink of finally seeing his dream come to fruition.
There was, however, one obstacle: Weill's birthmate, Glass-Steagall. Technically, the Citigroup merger was illegal in 1998, because the Depression-era law remained in effect, although it had been weakened by a succession of regulatory decisions. But Weill appealed to President Clinton and Alan Greenspan, and Citigroup received a temporary dispensation from the federal government to allow the merger. Theoretically, that gave Weill time to make his new conglomerate conform to the law. But Weill tried a different tack-he wanted the law to conform to it instead. Travelers and Citi lobbied Congress strenuously to pass new legislation that would bless their marriage, and Congress complied. In the end, Citigroup basically drafted the new law, Gramm-Leach-Bliley, that would govern its behavior. As banking analyst Kenneth H. Thomas notes, "Citigroup is not the result of that act but the cause of it." Gramm-Leach-Bliley became one of Weill's crowning achievements.
The problem with Gramm-Leach-Bliley wasn't so much that it replaced Glass-Steagall, only that it did so shoddily and haphazardly. There was a consensus that banking reform was needed-American banks were being kept too small to compete with their German and Japanese counterparts. But because Citigroup needed the legislation passed quickly in order to remain in business, Congress was forced to consider and pass a new bill on deadline, without time to carefully think through its consequences. The most important element that was missing from the Financial Services Modernization Act, as Gramm-Leach-Bliley was dubbed, was the modernization of the regulatory agencies that oversee the marketplace. Banks were given the right to merge into behemoths, but regulators remained scattered and focused on a world that had ceased to exist.
Or at least, that's the liberal case for new regulations. Weill appears to have realized that it's a powerful case, and he's moved to pre-empt it by self-imposing new rules and regulations that Citibank will abide by. But that puts him in a strange situation: Weill helped write the rules (or unwrote them) that permitted Citigroup to come into existence, then behaved sleazily under those rules, and now he's implying that those rules are to blame for his (and his firm's) behavior.
Perhaps for once, a bipartisan consensus can be reached. With financial scandals, Democrats usually say that the problem is inherent in the way the rules were written, and that new ones are needed. Republicans usually say that the problem stems from the actions of one or more bad actors. In this case, thanks to Sandy Weill, they can both be right.
If you liked this Assessment column, check out Backstabbers, Crazed Geniuses, and Animals We Hate, a collection of our all-time funniest, meanest, sweetest, and weirdest profiles.
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Feb 02, 2009 Daily Kos
I met a traveller from an antique land
Who said: "Two vast and trunkless legs of stone
Stand in the desert. Near them on the sand,
Half sunk, a shattered visage lies, whose frown
And wrinkled lip and sneer of cold command
Tell that its sculptor well those passions read
Which yet survive, stamped on these lifeless things,
The hand that mocked them and the heart that fed.
And on the pedestal these words appear:
`My name is Ozymandias, King of Kings:
Look on my works, ye mighty, and despair!'Via Krugman, a snapshot from just 18 months ago, in July 2007:
The tributes to Sanford I. Weill line the walls of the carpeted hallway that leads to his skyscraper office, with its panoramic view of Central Park. A dozen framed magazine covers, their colors as vivid as an Andy Warhol painting, are the most arresting. Each heralds Mr. Weill's genius in assembling Citigroup into the most powerful financial institution since the House of Morgan a century ago.
His achievement required political clout, and that, too, is on display. Soon after he formed Citigroup, Congress repealed a Depression-era law that prohibited goliaths like the one Mr. Weill had just put together anyway, combining commercial and investment banking, insurance and stock brokerage operations. A trophy from the victory -- a pen that President Bill Clinton used to sign the repeal -- hangs, framed, near the magazine covers.
These days, Mr. Weill and many of the nation's very wealthy chief executives, entrepreneurs and financiers echo an earlier era -- the Gilded Age before World War I -- when powerful enterprises, dominated by men who grew immensely rich, ushered in the industrialization of the United States. The new titans often see themselves as pillars of a similarly prosperous and expansive age, one in which their successes and their philanthropy have made government less important than it once was.
''People can look at the last 25 years and say this is an incredibly unique period of time,'' Mr. Weill said. ''We didn't rely on somebody else to build what we built, and we shouldn't rely on somebody else to provide all the services our society needs.''
Ah, good times -- thanks to Sandy Weill and his ubermensch Wall Street genius cronies, unencumbered by government, regulation, and peons like you and me.
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Subprime Stoked By Deregulation and Bipartisan Greed, not CRA, Community Reinvestment Act
Byline: Matthew R. Lee of Inner City Press in the South Bronx: News Analysis
Citigroup's grown in subprime had nothing to do with the CRA. Rather, insurer Travelers Group, controlled by Sandy Weill and Chuck Prince (and Robert Willumstad who would later drive AIG into the ground), which already owned subprime lender Commercial Credit, bought Citicorp and then subprime lender Associates.
They renamed the operation CitiFinancial, but never sought CRA credit for Citibank for its operations. And when Inner City Press asked Chuck Prince of Ciitgroup's securitization of loans by Ameriquest, Prince said that had nothing to do with the CRA.
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