As unbelievable as that may be (especially to me), I spent close to a decade on Wall Street. No one was more ill suited, but much of my years there were spent working for Sanford I. Weill. That made for an interesting time. When I arrived, Sandy and three equal partners ran what was still a relatively small boutique brokerage. They sat together in one large room, identical chairs and desks. The message: no single top dog at Cogan, Berlin, Weill and Levitt. The market dropped significantly on the day I arrived and never totally recovered during my tenure. Took me a long time to take the hint. It was a bear market but not for CBWL. Beginning with its acquisition of the old line but tottering Hayden Stone, Sandy’s firm started on what would be a path toward phenomenal growth. Within a relatively short time, Shearson Hayden Stone, as it became known, was an industry powerhouse and Sandy was its undisputed chief executive — What W would call, the decider.
I had left by the time Shearson was sold to American Express ultimately leading Sandy down a different and somewhat circuitous road. It would ultimately put him at the top of the world’s largest financial supermarket, Citigroup. In the final stretch of that journey, Sandy played an outsized role in convincing Bill Clinton and the Congress to overturn Glass-Steagall, the post Depression legislation separating commercial and investment banks. The Gramm Leach Bliley Act enabled his Travelers Group to merge with Citi giving birth to the behemoth bank that we all now know would be too big to fail.
Fast forward to last week when the same Sandy Weill, who had retired from Citi shortly before Wall Street’s house of cards began to crumble, used an appearance on CNBC to advocate for what amounts to a reinstatement of Glass-Steagall. While underreported, he had dropped a bombshell. It would probably be too much to ask that Sandy fess up to being wrong in the 1990s — he simply says times have changed and what was right then is no longer. One could judge him harshly for that, and rightly so, but he is just following the norm, a long line of business and political leaders who find themselves incapable of ever saying, I was wrong. Indeed, Sandy has gotten a lot of flack about his change of heart including from Jon Stewart (called to my attention by Phyllis Prinz).
And hardly surprising, his biggest critics come from the community of which he has been a lead player. These are the people who sit atop or benefit from today’s too big to fail banks. Among them are those who have been raking in billions, some making their own trades with what may be customer money. As far as I can tell, neither Bill Clinton nor his former Treasury Secretary Bob Rubin (who ended up in Citi’s executive suite), prime supporters of Gramm Leach Bliley, have reacted, certainly not publically. Sad to say, what we can expect is that any real discussion about reinstating Glass-Steagall type controls might be conveniently deflected by a critique of Sandy Weill. He is the perfect target. Focusing on the messenger here, no matter what he did in the past, is to miss the point and more importantly, to miss an opportunity to do something.
You might say that Sandy Weill is being hypocritical. That what we saw on CNBC was a self-serving rich guy trying to burnish his tarnished image. You may be right, no let’s say you are right. Feel better now? Pointing that finger may give us some satisfaction, but we may find ourselves with nothing more than a hollow self-indulgent moral victory. Not having talked to, much less seen, him in years, I have no way of knowing or being able to judge his motivations. What can be said is that, considering what’s at stake, and the potential of being side tracked from the very real issue at hand, perhaps we should give him a pass, even if a conditional one.
Aside from a chance and brief encounter in Zabars a few years ago, I haven’t talked to Sandy in years, but I knew him very well. He was a man of considerable integrity. He and his wife Joan have contributed millions to good causes from supporting hospitals to Carnegie Hall. But what you should know is that he is one of the smartest and most thoughtful executives I have ever encountered, and there have been many. As Hercule Poirot would say, Weill's grey cells were always working, usually at double speed and over time.
Perhaps the terrible things that have happened in the aftermath of overturning Glass-Steagall were predictable. A good number of Senators including Bryan Dorgan, Barbara Boxer, Barbara Mikulski, Richard Shelby, Tom Harkin, Russ Feingold and Paul Wellstone opposed it. But for a while the economy and business appeared (and I used that word intentionally) to be thriving. Money was being made on both Wall Street and Main Street and no one, including John Q. Public, was asking questions. Hear no problem, see no problem and for heaven’s sake, speak no problem.
Sandy is right; times have changed. Oh, have they changed. It isn’t only that the banks are too big to fail, but that they are too big to be either managed or supervised. If Sandy’s protégée Jamie Dimon couldn’t spot a multi-billion dollar loss before it was too late, we know that to be the case. Sandy was one to keep tabs on every dollar even as the dollars multiplied and one has to assume that Dimon was trained to do the same. The problem is that, while companies may scale up, an individual human’s capacity has its limits — at some point it can’t keep up. Of necessity, deciders these days rely on subordinates and are even unable to know what they are doing on a daily basis.
Breaking up the banks would likely be good for our financial system, but my guess is that it would also produce a lot of new jobs. Economies of scale, the kind of thing that equity people like Mitt Romney tout, always involve consolidation of services and thus a loss of jobs. The newly separated institutions would require their own infrastructures — specifically mandated to be separate.
So, yes Sandy you didn’t apologize, and maybe you are trying to burnish your own tarnished reputation, but let’s give you the benefit of the doubt. Of course making one comment in one TV appearance won’t be enough to say you are serious. Taking a further risk to alienate your old pals and expose yourself to criticism will be required. I hope your words won’t be ignored because further disasters lurk and too many people in your old business are acting as if nothing bad has already happened. Business as usual doesn’t cut it. No, business as usual is just plain frightening!