In a stunning reversal, a former big bank CEO who crusaded for policies that helped create the so-called "too-big-to-fail" banks now says we need to break up the banks.
"What we should probably do is go and split up investment banking from banking, have banks be deposit takers, have banks make commercial loans and real estate loans, and have banks do something that's not going to risk the taxpayer dollars, that's not going to be too big to fail," former Citigroup Chairman and CEO Sanford "Sandy" Weill told CNBC on Wednesday morning.
It's a shocking statement coming from Weill, who was responsible for turning Citi into one of the largest banks in the world. During his tenure, he bought up one financial institution after another and orchestrated the merger of Travelers Group and Citibank in 1998--at the time, the largest merger in history. He retired as CEO of Citigroup in 2003 and stepped down as chairman in 2006.
"Is Sandy Weill now considered a 'born again banker'?" Joseph Saluzzi, co-founder of Themis Trading and prominent Wall Street critic, tweeted Wednesday morning when Weill's statements made the rounds.
Weill was pivotal in lobbying for the succesful repeal of the Glass-Steagall Act in 1999, a 66-year-old law that had separated commercial banking from investment banking.
Some blame the financial crisis, in part, on that appeal.
"I think that the earlier model was right for that time... I don't think it's right anymore," he told CNBC. "I think that this system is really immobilizing the banking system."
Weill added that he thinks banks will be more profitable once broken up, and that the markets would function better.
"The markets worked fine before...and I think that can work fine again if people had confidence in how the financial industry was structured," Weill said. "If the financial industry is structured with transparency and with limits on how much leverage can be used, I think people would have a lot more confidence because they would know what's there."
Check out the reaction on Twitter to Weill's comments here: