American Banker Magazine, a financial daily with 10,000 bank subscribers, reported on Wednesday that both Democratic and Republican congressmen were thunderstruck by Sandy Weill's comments, "suggesting a new openness to the argument that the nation's largest banks should be broken up."
"'It's absolutely huge that Sandy Weill has called for the break-up of the big banks,' said Rep. Carolyn Maloney (D-NY), who represents much of Manhattan and voted for the 1999 repeal of the Depression-era Glass-Steagall Act.
"Rep. Walter Jones (R-NC), who had previously expressed regret over his earlier support repealing the law, said Wednesday that it was one of the worst votes he has made in 18 years in Congress. 'Isn't it time to have a discussion and a debate about the reinstatement of Glass-Steagall?' he asked Geithner [at the House Financial Services Committee hearing].
Geithner said that he had not yet heard Weill's comments, and tried to argue that "the Dodd Frank Act provides strong disincentives ... But Geithner was less firm in his opposition to separating commercial banking from investment banking than he was during 2009 congressional testimony, when he said: 'I would not support reinstating Glass-Steagall.'"
After mentioning Sen. Sherrod Brown's (D-OH) bill to impose limits on the size of bank deposits, leverage, and liabilities, author Kevin Wack quotes Sheila Bair, the former chairman of the Federal Deposit Insurance Corp., who said Wednesday that Citigroup is a poster child for the too-big-to-fail problem. "'So it is truly ironic, but obviously I agree with him,' Bair told CNBC, referring to Weill's statements. 'I think these banks are too big to manage centrally. They're too big to regulate, and they don't produce good shareholder value, either. There's a lot of value to be had if they were broken up.'"
"Bair's comments were hardly a surprise, but the apparent shifts in opinion on Capitol Hill were potentially more significant. Supporters of Lyndon LaRouche have recently been distributing pamphlets outside the Capitol calling for the return of Glass-Steagall — a symbol of how politically marginal the debate about breaking up the big banks has been until now....
"It seemed meaningful when Maloney asked Geithner to provide a written analysis of how the financial crisis would have played out differently if Glass-Steagall had still been in effect.
"Rep. Bill Huizenga, a first-term Republican from Michigan, also sounded intrigued by the idea of reinstating Glass-Steagall, though he stopped short of offering his own opinion. Huizinga spoke for many cable news viewers when he said, 'I was watching Squawk Box when Sandy Weill made his comments, then saw the crawler about Glass-Steagall, and I was like, 'OK, did he really specifically say that?'"
American Banker Magazine's editor-in-chief, Neil Weinberg, used a video interview on the Magazine's "The Week in Banking" to make the following comments, himself, on Sandy Weill's call: "Sandy Weill of all people, came out this week and said 'It's time for Glass-Steagall' ... One of the things that was really interesting about it was that it seemed that this was the moment that actually the breakup the big banks movement started to get some traction, at least in the popular press, maybe in Washington."