It is – justifiably – big news that former Citi CEO Sandy Weill said that we should break up the big banks, and separate traditional depository banking from speculative investing. Indeed, even congress members are confronting top government officials on why they haven’t done this.
But Weill said 3 other equally important things today.
Secondly, Weill said that we have to restore transparency, so that nothing is hidden off balance sheet. (Leading economist Anna Schwartz told the Wall Street journal in 2008: “The Fed … has gone about as if the problem is a shortage of liquidity. That is not the basic problem. The basic problem for the markets is that [uncertainty] that the balance sheets of financial firms are credible.”)
Mr. Weill’s suggestions would go a long way toward fixing our broken financial system and giving us a shot at prospering once again.
We are obviously not defending Weill’s horrific past actions, and he
failed to mention prosecuting fraud, which is perhaps the most important action we can take to help the economy recover. And we believe that bonuses and ill-gotten gains should be clawed back from every Wall Streeter who committed fraud.
However, we take our allies where we find them. And
on the points he raised today, Mr. Weill’ is on the same side of the
fence as all of the top independent economists and financial experts.