While the financial supermarkets were “right for their time,” Weill said, times have changed and it is time to break up the banks to protect taxpayers and financial institutions:
WEILL: 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. If they want to hedge what they’re doing with their investments, let them do it in a way that’s going to be market-to-market so they’re never going to be hit.
Later, Weill went even farther, explicitly saying the banks needed to be broken up. “I’m suggesting that they be broken up so that the taxpayer will never be at risk, 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 Volcker Rule, they can make some mistakes, but they’ll have everything that clears with each other every single night so they can be market-to-market,” Weill said.
Weill isn’t alone in his endorsement of separating commercial banking from riskier investment banking. A former Goldman Sachs trader made the case for it in his resignation letter and another former Citigroup CEO, John Reed, wrote a letter to the Securities and Exchange Commission calling for breaking up the biggest banks.