Former Citigroup CEO Sandy Weill Says Break Up Big Banks
Wall Street Legend Wants a Simple, Single Page of Regulations
Capping off a day-long visit to UC Davis, including meetings with Graduate School of Management faculty and students, Chancellor Linda Katehi and touring the Mondavi Center, the former chairman and CEO of Citigroup Sandy Weill sat down with Dean Steven Currall for a conversation about the state of the financial industry, his leadership and management style, philanthropy and his intriguing proposal to boil today’s complex banking regulations down to a single-page.
A legend on Wall Street, Weill spent more than five decades managing money, reaching the top of the world’s most successful companies. At the February Dean’s Distinguished Speaker event, he was joined by his wife, Joan. Married for 58 years, they are world-renowned philanthropists. They recently purchased a winery in Sonoma and are spending more time in California.
“We get an enormous amount of pleasure out of it,” Sandy Weill said of their philanthropy, noting that in times of shrinking government funding it becomes increasingly important for the private and public sectors to work together.
“Of course, we’ve always been very surprised that we can do this,” Joan Weill added. “It didn’t start out that way at all.”
As newlyweds, Weill said he made $150 a month as a runner for Bear Stearns. His wife made more money teaching two days a week. Her parents, she said, weren’t too impressed with her new husband.
But Weill rose quickly on Wall Street. By the mid-1960s he was serving as chairman of Cogan, Berlind, Weill & Levitt, a securities brokerage firm. He went on to become president of American Express Company and chairman and CEO of its Fireman’s Fund Insurance Company subsidiary, chairman and CEO of Travelers and chairman of its predecessor, Commercial Credit Company. Through a series of acquisitions involving Commercial Credit, Primerica Corporation Travelers, Salomon and Smith Barney, Weill became CEO of Citigroup in 1998 and built it into the world’s largest bank before retiring in 2003.
Often credited with creating the modern financial supergiant, Weill surprised the industry last year when he told CNBC that he now believes that commercial banks should be split from investment banks. He said that financial institutions have become too big and too risky with taxpayers’ money. More importantly, he said the public distrust in the wake of the global financial crisis has left little tolerance for mistakes, which hinders innovative thinking.
“I think we’ve strangled the financial industry without really coming up with real facts as to how they should be managed.”
Five years after the financial collapse, attempts to prevent future crises have become mired in complex regulations, he said, noting that the Dodd-Frank Act runs nearly 900 pages. He said financial industry reform could be as simple as a one-page document with three main points. First, limit the amount of leverage a financial institution could have to about 15 times the risk-weighted assets versus the 30 to 40 times common before the financial crisis. Second, do away with off-balance sheet assets; everything should be transparent. And finally, set up an exchange for derivatives where they are traded openly, mark-to-market every day.
Joining the Weills for the discussion was Anne Simpson, senior portfolio manager and director for corporate governance for the California Public Employees’ Retirement System, the nation’s largest public pension plan. Simpson said she was intrigued by the idea of a one-page fix, and offered to partner with Weill to move the proposal forward to lawmakers.
by Crystal Ross O’Hara