Forum Post: Glass-Steagall Repeal Caused Collapse, Former Citigroup Chairman Says
Posted 12 years ago on April 21, 2012, 1:51 p.m. EST by arturo
(3169)
from Shanghai, Shanghai
This content is user submitted and not an official statement
Richard Parsons, speaking two days after ending his 16-year tenure on the board of Citigroup Inc., where he had served as chairman since 2009, said at a Rockefeller Foundation forum Thursday that, "To some extent what we saw in the 2007, 2008 crash was the result of the throwing off of Glass-Steagall. Have we gotten our arms around it yet? I don't think so, because the financial-services sector moves so fast."
The existence of Citigroup, created by the 1998 merger of Citicorp and Sandy Weill's Travelers Group (which owned Soloman Smith Barney), depended on the U.S. government overturning Glass- Steagall, which outlawed both insurance operations and investment banking by commercial banks. Alan Greenspan and his cohorts in Congress gladly complied.
John S. Reed, the former Citicorp CEO, also said in 2009 that he regretted having worked to overturn Glass-Steagall, and called for "some kind of separation between institutions that deal primarily in the capital markets and those involved in more traditional deposit-taking and working-capital finance."
Parsons did not go so far as to call for restoring Glass- Steagall. "We are going to have to figure out how to manage in this new and dynamic world, because there are good and sufficient business reasons for putting these things together," Parsons said. "It's just that the ability to manage what we have built isn't up to our capacity to do it yet."
Nor could it ever be.
Translation of Parsons comment: "The problem isn't that we're a huge vampire squid, as we've been called, it's that we overestimated the amount of blood we could suck out in a given amount of time. We have to learn not to suck so hard."
Really sucks, doesn't it.
Heh heh heh. It does indeed.
Sounds about right.
Re-instating what the D/R repealed should be a no brainer....
and this is news? i thought everyone already knew this
Credit defualt swap insurance, that they allowed to be created in 1994 also played a large role.
The killer was the 'Commodities Futures Modernization Act of 2000'
The repeal of Glass-Steagall created the 'too big to fail' institutions.
At least some high ranking bank officers are telling the truth. This is what the Chairman of the Board of Wells Fargo had to say about the crash:
http://www.youtube.com/watch?v=4sA_WUZBM24
"04:49 This problem was caused by a total disregard by financial institutions' management of basic risk management of fundamentals, even common sense, coupled with a serious lapse in ethical behavior. It was fueled by greed, unchecked by regulatory authorities and reached an unprecedented scale due to the breakdown in previously reliable third party safety valves, namely rating agencies."