In a July 26 editorial on how banker Sanford Weill has remarkably converted to supporting restoration of Glass-Steagall, the New York Times announces, "We do, too." The editorial is titled, "The Big Banker's Change of Heart":
"Sometimes, in a great national debate, the most powerful voices can be those of the converted.... Now add to the list Sanford Weill, the financier who led the charge for the repeal of the 1933 law that separated commercial banks from investment banks....
"In the late 1990s, Mr. Weill used the repeal of the Glass-Steagall Act to help usher in an era of huge firms epitomized by his own Citigroup that brought trading, mergers and acquisitions, commercial lending and other banking services under one roof. Banks became bigger and bigger and their banking and trading arms more intertwined. It was the beginning of a period of sharp deregulation of the financial industry in general.
"Some expressed alarm about having banks, driven by huge profits and huge bonuses, bet the money of their depositors on new, opaque and increasingly risky investment instruments. But the idea that the industry did better without regulation was entrenched in the political debate, not only on the right, but across the political aisle and into the higher reaches of the Clinton administration. It was not until the 2008 financial crisis that Americans woke up to the dire threat posed by banks so big that their failure could destroy the financial system and even the economy.
"Appearing Wednesday morning on CNBC, Mr. Weill surprised everyone, including his interviewers, by announcing that the wall should be rebuilt between a bank's deposit-taking operations and its risky trading businesses. 'What we should probably do is go and split up investment banking from banking,' he said. 'Have banks do something that's not going to risk the taxpayer dollars, that's not going to be too big to fail.'
"It's tempting to say that Mr. Weill sure took his sweet time coming to this realization.... But the important thing is that the architect of the megabank has stepped forward and called for sensible financial regulation, much in the same way that Warren Buffett shook things up by calling for tax increases on the most wealthy Americans. Other bankers from the 1990s boom have also expressed concern about deregulation, including John Reed, who helped create Citigroup with Mr. Weill.
"Mr. Weill's position carries special weight. Representative Carolyn Maloney, a Democrat of New York, said at a hearing on Wednesday that Mr. Weill appeared to be calling for even stronger regulation than envisioned in new rules aimed at curbing the risky behavior of banks.
"While we are on this subject, add The New York Times editorial page to the list of the converted. We forcefully advocated the repeal of the Glass-Steagall Act. 'Few economic historians now find the logic behind Glass-Steagall persuasive,' one editorial said in 1988. Another, in 1990, said that 'the notion that banks and stocks were a dangerous mixture makes little sense now.'
"That year, we also said that the Glass-Steagall Act was one of two laws that stifle commercial banks. The other was the McFadden-Douglas Act, which prevented banks from opening branches across the nation.
"Having seen the results of this sweeping deregulation, we now think we were wrong to have supported it."