Former Citigroup honcho Sandy Weill’s Damascene-Napoleonic-Frankensteinian-whatever conversion on the value of Glass-Steagall this week has reverberated all over Wall Street.
“It’s incredible — he’s found Jesus,” one cynical Wall Streeter told me last night.
But Weill’s call to break up too-big-to-fail banks has gotten a particularly chilly reception among one crowd in particular — namely, other people who made millions of dollars running too-big-to-fail banks.
“Why this concept that investment banking is risky?” former Wells Fargo CEO Richard Kovacevich asked the Wall Street Journal yesterday. “Investment bankers are risky, not investment banking.”
“I don’t buy it,” former JPMorgan Chase CEO William Harrison told Reuters, when asked about Weill’s contention that breaking up banks would unlock shareholder value and reduce systemic risk. “It gets back to management and risk-taking, and you can screw that up at a small bank or a large bank.”
Harrison also told the Journal that reinstating Glass-Steagall, as Weill essentially suggested, would be “a huge mistake for the United States.”
It’s true that Weill has some other prominent supporters. Barry Ritholtz has a list of other Wall Street tycoons and economists who have called for the separation of commercial and investment banks, including former Citi chairman Richard Parsons and former Merrill Lynch boss David Komansky.
But, as Ben Walsh of Reuters notes, it’s easier to come out against big banks after you’ve retired from them and are no longer profiting handsomely from the Glass-Steagall–less status quo.
When a current, salaried TBTF-bank executive calls publicly for the dissolution of the megabank, you’ll know that Weill’s about-face is truly catching on. But I wouldn’t hold my breath.