Ex-Citigroup CEO: Break up big banks

Citigroup CEO Sanford Weill speaking in March 2002 at a news conference in Tokyo, Japan. / KAZUHIRO NOGI/AFP/Getty Images

(AP) NEW YORK - Sandy Weill, the aggressive dealmaker who built Citigroup (C) on the idea that in banking, bigger is better, said Wednesday that he believes big banks should be broken up.

Speaking on CNBC's "Squawk Box," the 79-year-old Weill appeared to shock the show's anchors when he said that consumer banking units should be split from riskier investment banking units. That would mean dismembering Citigroup as well as other big U.S. banks, like JPMorgan Chase (JPM) and Bank of America (BAC).

It's an idea that's traditionally more in line with the banking industry's harshest critics, not its founding fathers. It's an ironic twist coming from an empire-builder who nursed Citigroup into a behemoth. And it's directly opposed to the stance of the industry's current leaders, like JPMorgan CEO Jamie Dimon, who have been trying to convince regulators and lawmakers of just the opposite, that big banks do not need to be broken up.

LIBOR fallout: EU may criminalize rate-rigging
JPMorgan to pay cardholders in $100M settlement
HSBC apologizes for lax controls

Weill said the radical change is necessary if U.S. banks want to rebuild trust and remain leader of the world's financial system.

"Our world hates bankers," he said.

Big banks have been a flashpoint in the financial crisis and its aftermath. Critics blame them for risky trading that created a housing bubble and eventually led to global economic upheaval. In some circles, there's still resentment that the government used taxpayer money to give bailout loans to the biggest banks, deeming that the financial system wouldn't be able to handle their failure.

Weill said that standalone investment banks wouldn't take deposits, so they wouldn't be bailed out.

Investment banking, which offers services like trading stocks and packaging loans into securities, can be spectacularly profitable in the good times and spectacularly unprofitable in the bad. Consumer banking, the plain-vanilla business of making loans and accepting deposits, generally offers a steadier, if slower, way to make profits.

Banks that have both say it's necessary to keep them together because they balance each other, ensuring stability no matter the economy.

Weill said banks have also taken on too much debt and need to provide more disclosure about what's on their balance sheets.

But in the same interview, he showed his fondness for the industry. He credited mega-banks for providing capital markets that helped convert communist countries to capitalism, and moved poor people into the middle class.

"It is really sad what is happening, and it's sad for young people," he said. "This was an industry that attracted a lot of really terrific people."

Weill retired as CEO of Citigroup in 2003 but remained chairman until 2006, building it into a giant that offered both consumer and investment banking.

Asked about his about-face, Weill said he had been getting his thoughts together over the past year.

"I think the world changes," he said, "and the world that we live in is different than the one that we lived in 10 years ago."

[venusvegasvada]

Biggest story since 1999 and CBS buries it on the back page. Nice.

So they get what they wanted.

-Destroyed the Glass-Steagall Act and with it, 7 decades of real estate/financial stability of ALL the classes.

-Wrote and passed the GOP driven garbage of Gramm-Leach-Bliley to replace it.

-Snuck in the legalization of Bucket Shops/Credit Default Swaps into the Commodity Futures Exchange Act of 2k. Legalizing something Buffet called "financial weapons of mass destruction" since 1909.

People have been calling for them to put it back the way it was since the melt down, but the GOP keeps blocking it.

I don't believe for a second these bankers are doing this for nothing. No, it's because of the 32 Trillion dollars the Rich guys are sitting on in the Caymans and in Switzerland. When the poor and the middle class get screwed over, no big deal. But when even the Rich see that Wall Street is out of control and won't give them their money, we'll that's something else entirely.

So now, after all the BS, this guy comes up with: "It's better to go back to the smaller, segregated banks we had for 7 decades, when Glass-Steagall was in effect (1932 to 1999) and have access to that 32 Trillion sitting offshore, than to be the super greedy mega-banks, that area not only so big that when they fail, the taxpayer has to cover it, but EVERYONE on the PLANET HATES THEIR GUTS.

Just what did they expect anyway? Still driven by greed. If it wasn't revealed that so much cash was sitting out of the game overseas, do you think this guy would be changing his tune now? Jeeze, he was one of the architects of the destruction of Glass-Steagall and more than a little personally responsible for our global financial meltdown.

No, doing the right thing has nothing to do with it. He wants to get his hands on a piece of that 32 Trillion. Period.