Weill: Breakup Up the Big Banks

Sandy Weill, the man who grouped Citigroup ($C), made news today by calling for the breakup of large banks.

Former Citigroup chairman Sandy Weill — who engineered a series of corporate takeovers and lobbying efforts to create Citigroup — explained during an interview on CNBC why he now thinks a firewall between commercial and investment banks is needed.

“What we should probably do is go and split up investment banking from banking,” Weill said. “Have banks do something that’s not going to risk the taxpayer dollars, that’s not too big to fail.”

Weill’s call to break up the nation’s largest banks comes a little more than a decade after he helped orchestrate the merger of Travelers Group and Citicorp, a deal that created what was the world’s largest financial services company.

Sorry, Sandy, but you’re a little late. I called for Citi to be broken up by management seven years ago:

I think that the real problem is that “Citi” as it’s now constructed doesn’t work. Big doesn’t mean better. Commerce (CBH) is so much stronger than Citi right now even though it’s around 1/40th the size. With Sandy out of the way, Prince & Co. should break up the company. The Travelers Life & Annuity sale should be the first of many more sales. A breakup will be better for shareholders, customers and employees.

Citigroup is a good example of a stock that looks cheap, but really isn’t. The firm is still on the Federal Reserve’s Double Secret Probation. Citigroup is barred from making any more acquisitions. Now that it looks like any new Fed chair will be raising rates next year, I’d stay far away from Citigroup.

At the time I wrote that, shares of Citi were at $44 — which is now equivalent to $440 due to the 1-for-10 reverse split. The stock is currently at $25 per share.

By the way, Commerce was later bought out almost exactly at the market peak by TD Bank Financial Group for $8.5 billion.

Josh Brown adds his thoughts about Sandy: “One wonders whether or not he is sincere or if there is some angle. Or perhaps this is about burnishing his legacy. Or maybe he means it.”

Posted by on July 25th, 2012 at 12:20 pm


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