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Glass-Steagall is a Dream Worth Revisiting

25 | By Shah Gilani

There’s a dream keeps returning, like rain to the sea.
There’s a fire ever burning in the souls of the free.
There’s a lifetime of learning that it’s all been in jest.
And at the end of your journey, it’s like you never left.

~ Dave Mason

Those lyrics are great. They apply to a lot of things in life.

That includes me seeing the legendary Traffic singer/songwriter and guitarist Dave Mason recently, after last seeing him 10 years ago. He was once again at Stephen Talkhouse in Amagansett, New York, and I saw him with some old friends two weeks ago.

Besides being a legend, he’s a really good man.

He’s supporting Wounded Warriors and other projects, like Work Vessels for Veterans, which helps support veteran entrepreneurs trying to get their business dreams off the ground. I urge you all contribute to help the incredibly brave men and women in our armed forces who sacrifice so much and get so little in return.

We did our part that night by bidding up the price and winning a signed guitar that Dave Mason was auctioning, as he is doing at other shows.

Here’s a picture of Dave in the middle, me on the right, and one of my best friends, Dr. Mark Kot, the real Hamptons doctor (yeah, they made a TV show based on him) on the left.

But I digress. Although it’s for a good cause. We can never do enough for our troops!

There’s another dream that’s returning today. And it is one that many of you have been actively dreaming about.

Glass-Steagall.

Like rain to the sea, the fallout from the implosion of too-big-to-fail banks that poisoned our capital markets and economy may, God willing, help resurrect the Depression-era legislation that separated commercial banks from investment banks.

I’ve been calling for that for years now. And almost all of you are soldiering with me in that camp.

Well, it seems we may now have a new general to lead us.

Sandy Weill, the architect of TBTF behemoth Citicorp, and the former lieutenant general leading the charge to wipe out the last remnants of Glass-Steagall in 1999, just made an unbelievable about-face.

On CNBC on Wednesday, Weill made headlines when, as a guest host he said that while he was right in 1999, things have proven that he’s not right any more, and commercial banks and investment banks should be separated.

In no uncertain terms, he’s advocating the resurrection of Glass-Steagall. Hallelujah!

He’s not the first of the old guard that once pushed a future full of giant supermarket banks, also known as “universal” banks, to rethink where that’s gotten us.

John Reed, the former chairman and CEO of Citibank – before it was merged into Sandy Weill’s Travelers giant insurance conglomerate that owned Salomon Smith Barney to create Citicorp – spoke out in 2009. So did Phillip Purcell, the former chief executive of Morgan Stanley, and David Komansky, the former head honcho at Merrill Lynch. It seems that these former “bigger-is-better” banking legends are second-guessing their vision of a boundaryless future of banks without borders.

Our new general has singlehandedly changed the dialogue by bringing the past into focus and honestly calling out the deregulators to admit they were wrong, as he was.

That is leadership.

Who cares about the past? So what if he was at the forefront of the TBTF movement? He’s seen the error of his ways, and we all need to thank him for his honesty and for saying exactly what he said, which was that, “creativity, ingenuity and brainpower of the people (bankers) is much more important than size.”

With regard to what I believe is the greatest problem facing the U.S. right now, the public’s lack of confidence in our capital markets and banks, Weill said this: “By creating an environment where we can attract the kinds of people to be leaders, the system would create leadership again in American financial institutions,” and “they’d do a helluva lot better than the ones that just have big balance sheets; and that’s always been the case.”

Now, that’s a dream worth returning to.

Shah

25 Responses to Glass-Steagall is a Dream Worth Revisiting

  1. terry l. thomas says:

    Now if only the “brain trust academic/economic genius’s” who have never worked in the REAL WORLD shoud be required before they are awarded their doctorate or Phd (otherwise know as piled high and deep) to spend 5-10 years actually working.

    Then they can go back to academia and spout their fantansy’s about economic theory.

    All those degrees mean nothing except that you know how to pass test and spit back to your professor the drivel they said.

    Give me somone who knows what it is like to work, struggle, meet payrolls, pay for somone to wade thru all the government paperwrok and other NON-PRODUCTIVE, TIME WASTING EXPENSIVE & EXPANSIVE & INTERFERING NON-INCOME PRODUCING BULL MANURE.

    I’ll hire them in a heart beat!

    Thank you Shah!

    • Steve says:

      Terry: You have hit upon a fascinating possibility. There are just too many PHD’s. A doctorate is easier than ever to “earn”, and it certainly is more influential in society than it should be.

      The concept that a doctorate should only be awarded after completing academic requirements and passing a juried review of accomplishments made during a ten year apprenticeship in a non academic environment. Few would be honored. Just imagine if the likes of Dr.s Myron Scholes and Robert C. Merton had to meet that 10 year requirement! The designation of “Economist” would certainly mean something different than it does now.

  2. Robert in Canada says:

    Glass-Stegal should never have been repealed in the first place.

    Solid banking systems such as Canada and Australia have their own type of Glass-Stegal and look at how well they came thru the past 5 years of turmoil.

    It was plain to see in 1999 that Glass-Stegal was a good idea, but a corrupt President Clinton pandering to corrupt Wall Street bankers rolled the dice for personal gain.

    Bankers in Canada and Australia have tried a number of times to do the same as Wall Street banks, but the governments in those 2 countries simply say NO.

  3. Alan Hunt says:

    Hmmm… sounds like a death-bed conversion, welcome but always to be taken with a large grain of salt.

  4. Werner says:

    Shah, I would like to see your dream become true, and not only in the US, but in most other countries too since the model of “universal” bank has been copied everywhere.
    However I have some doubts since too many politicians are paid by banking lobbyists to undo that source of financing. Nonetheless, congratrulations to Sandy Weill to have admitted being wrong !

  5. Terrence Trivett says:

    I have to say that this “about face” by Sandy Weill is the most encouraging news in a long time. What can be done to grab this opportunity to bring back Glass Steagall or something similar? I do hope that this chance for honest reform is not lost.

  6. Michael says:

    “Well, it seems we may now have a new general to lead us. ”

    Shah, as you know, Snake’s shed their skins annually. All snakes, even the deadly poison ones!
    What was it that baby Bush said about fool me once? once a Poisonous Snake always a poisonous Snake. They don’t shed their venom or fangs.
    Trust Weill to lead? Trust Dave Mason, with his new skin (head) to lead?
    I followed Dave Mason back in the 60’s and early 70’s – he was wearing a different skin in those day’s past, a Peace loving skin. An Anti-Draft – Anti-War skin.
    Fool me once shame on me, fool me twice shame on me?? The Who created an Anthem in 1970 called “Won’t get fooled again”. I suggest you listen to it. It contains a line about the Boss, who you call the Matrix, your new Pal’s seem to me to be “same as the Old Boss”, which now poses the thought within me – “Who can be trusted to lead our monumental fight?
    Though I like you and follow your work, appreciate your sense of humor and taste in Music, I now wonder what the color of your skin will be tomorrow?
    My Father told me as we walked through the woods “Never take your eyes off a poisonous Snake”.. I never forgot his word!

  7. Rick Beaver says:

    Seems like tax free spin offs from the TBTFs would enrich shareholders, maybe at the expense of mgmt. If big bank failures become common in EUR zone, how unlikely would it be that a large US bank would spin itself into pieces? Maybe C would? And won’t their assets be highly profitable soon? I like the idea of buying JPM at 65 pct of book value. Other than GS, is there another TBTF more connected to the sovereign and likely to be enriched with new accommodative Fed policy? Might it be a possibly favorable position to be long the sovereign somewhat?

  8. ROBERT says:

    So the greedy fools who helped caused this mess have come to their senses.
    Now they will get all kinds of credit, like reformed drug addicts and drunks

  9. David Mortimer says:

    Here in Australia, looking over the oceans and seas, GO FOR IT, AMERICA! Bring back Mr G and Mr S.

  10. Richard says:

    Only complete idiots would by this crap from former TBTF sharks. Throw the bunch of them under the nearest bus!! Shah, shame on you!

  11. James McCoy says:

    I thought from the first cry of fear that TARP might be a giant heist and I think I was correct. I don’t trust Sandy Weill any further than I could pick him up and throw him. If G-S comes back intact, it would probably be a good thing. However, you can bet your bottom dollar that the banksters will have a field day with it’s replacement (witness Dodd-Frank) and it it will have all of it’s teeth pulled.

  12. Penny says:

    I am a happily married 59 year old woman, even so, this morning I sure enjoyed looking at this picture of you, Shah. Wow, if only I could be thirty again.

  13. Tom Hegarty says:

    Fine!
    So the taxpayer might get off the hook but doesn’t it just mean most of the bad old ways just continue, where peoples lives are manipulated from a an obfuscated distant point ?
    No ethical shift at all !

  14. fallingman says:

    The horse is out of the barn, The system is at risk and doomed to reap what it has sown.

    Reinstating Glass-Steagall is seen by many as some kind of panacea. Don’t count on it. Those insanely leveraged bets are gonna backfire on someone and when they do, it won’t matter what the current law allows or forbids.

    You may be able to prevent further insane behavior by “banks,” but you can’t undo what’s been done

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