So Former Citigroup CEO Sandy Weill, the father of two horrendous ideas (megabanks and financial deregulation), has come around, acknowledging that the premise of his repeal-Glass-Steagall ideology is wrong. Even Weill now says: Break up the banks because it will make the financial system safer and the economy sounder.
But before we all start waxing poetic and singing his praises, we should remember that most clear-thinking economists, and even many bankers, had come to this conclusion long before Weill did—including John Reed, Weill’s former co-CEO at Citigroup; Philip Purcell, the former CEO of Morgan Stanley; and Richard Fisher, the president of the Dallas Fed. But at least Weill finally got it right, even if he is still to blame for one of the most damaging policy shifts in our economic history.
Here are a couple of crucial lessons we should all agree on: The so-called synergy that Weill and others claimed would result from merging commercial banking and investment banking often ended up being little more than the triumph of fraud and avarice over truth-telling and fiduciary duty. The notion of self-regulation is a pure canard. It is no more than a license to steal and a cover for corruption.
But what to make of the few who remain steadfast in their dedication to the broken system of self-regulation and big banks? Like Mitt Romney, whose only answer to reforming financial services is to repeal Dodd-Frank and then let the chips fall where they may?
It is hard not to conclude that when it comes to financial services, Mitt Romney is about where he is on most other matters: wandering aimlessly, doing little more than repeating the disastrous mantras of the past. He has shown not a moment of originality, independence, reflection, or leadership in this entire campaign. Instead, his is a spineless voice for tired, failed answers that are now even rejected by his former friends. Isn’t he feeling a little lonely out there?