It was riotous, side-splitting comedy last week when Sanford Weill, the onetime head of Citibank, went on CNBC to announce that he thought it was time to break up the big banks.
Why this was funny: Through his ambitious (and at the time not yet legal) decision to merge Citibank, Travelers, and Salomon Brothers into one giant wrecking ball of greed, self-dealing and global irresponsibility called Citigroup, Weill more or less single-handedly created the Too-Big-To-Fail problem. You know, the one currently casting that thick, black doomlike shadow over all humanity which, if you look out your window, you can see floating over all our heads this very minute.
Nonetheless, Weill came out last week against Too Big to Fail banks. "I’m suggesting," he told astonished reporters on a live CNBC interview, "that they be broken up so that the taxpayer will never be at risk…. What we should probably do is go and split up investment banking from banking."
The interview became an instant YouTube classic. The very funniest part, I thought, was the response of Squawk Box host Andrew Ross Sorkin, the single most credulously slobbering financial reporter on the planet this side of Maria Bartiromo. Even he was so shocked by Weill’s comments that he lost his voice – "I’m speechless," he said.
At about the 1:20 mark of the clip, just after Weill offered his incredible opinion about the need to break up the banks, any sensible reporter would have pounced. Some version of, "Dude, are you high? You invented Too Big To Fail!" would have been the proper response – followed hopefully by a spirited lunge across the set to beat Weill repeatedly about the neck and head with a Swingline stapler, until he screeched out a tearful apology to every last living soul on earth...
How the Wall Street Journal can bring up the LIBOR scandal – both a textbook case of antitrust crime and more or less the ultimate example of insider trading, with banks trading against their own secret, non-disclosed manipulations of interest rates – and lump it in with things that supposedly "aren't crimes" is beyond mind-boggling. People can and do go to jail in America for smoking marijuana or selling food stamps for rent money, but apparently it reeks of Stalinism to even suggest that even one person should go to jail for manipulating an $800 trillion market. Moreover Weill, far from simply being one of the last people on earth to admit the obvious truth about Too-Big-To-Fail banks, has instead just crossed over into the Stalinist camp.
But the Wall Street Journal didn’t even win the prize for most preposterous response to the Weill episode. That award went to former Treasury advisor and semi-disgraced financier Steve Rattner, who wrote a truly incredible piece in the New York Times editorial page about why Weill is wrong...
But he went on to say that Weill’s musings were "an ill-advised distraction." The reasons he gave for believing this are astounding. And what's astounding is not just that he has these opinions, but that his "reasons" got past the Times editors, who should have blanched at publishing such gross inaccuracies...
There are so many things wrong with this passage, it’s hard to know where to start. But let’s take the most obvious problem: He’s lying!...
Rattner wrote some other crazy things. He said, "it is wrong to think we can shrink banks to a size that eliminates the 'too big to fail' problem without emasculating one of our most successful industries."
One could go on at length in answering this ludicrous passage, pointing out for instance how insane it is for Rattner to call TBTF banking "one of our most successful industries" when the business is now known all over the world to be so totally corrupt that nobody was even surprised when they found out that global interest rates were being manipulated. Or when basically theentire banking industry has been downgradedto near-junk status thanks to the widespread perception that their balance sheets are a travesty of phony accounting and unrealized losses.
But this would just be beating a dead horse. These arguments have been made over and over again. Even Sandy Weill is making them now. But everybody knowing the truth and everybody doing something about it are two different things, as we’ll likely spend the next years, or even decades, finding out.
