Former Citigroup Chairman and CEO Sanford I. Weill has come out in favor of breaking up the nation's largest financial institutions by separating consumer banking from investment banking.
In an interview with CNBC's ‘Squawk Box,’ Weill all but called for the return of the Glass-Steagall Act – an unexpected pronouncement, considering Weill's role in building Citigroup to its current state.
‘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, have banks do something that's not going to risk the taxpayer dollars, that's not too big to fail,’ Weill said. ‘If they want to hedge what they're doing with their investments, let them do it in a way that's going to be mark-to-market so they're never going to be hit.
‘I'm suggesting that they be broken up so that the taxpayer will never be at risk,’ he continued. ‘The depositors won't be at risk, the leverage of the banks will be something reasonable, and the investment banks can do trading – they're not subject to a Volker rule, they can make some mistakes, but they'll have everything that clears with each other every single night so they can be mark-to-market.’
Weill added that breaking up the largest financial institutions would increase their profits substantially.
‘This is what all the regional banks do, and everybody says buy regional banks,’ he said. ‘They'll just be bigger regional banks.’
(Photograph courtesy of DSPhotography)