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Former Citi Boss: Reduce Leverage to 15 Times Assets, Put EVERYTHING Back on the Books, and Mark All Assets to Market EVERY DAY

George Washington's picture




 

It is - justifiably - big news that former Citi CEO Sandy Weill said that we should break up the big banks, and separate traditional depository banking from speculative investing. Indeed, even congress members are confronting top government officials on why they haven't done this.

But Weill said 3 other equally important things today.

First, Weill told CNBC that the financial crisis was largely caused by too much leverage, and that we should reduce leverage to between 12-15 times. (Background.)

Secondly, Weill said that we have to restore transparency, so that nothing is hidden off balance sheet. (Leading economist Anna Schwartz told the Wall Street journal in 2008: “The Fed … has gone about as if the problem is a shortage of liquidity. That is not the basic problem. The basic problem for the markets is that [uncertainty] that the balance sheets of financial firms are credible.”)

Third, Weill said that assets must be marked to market every day. (Background here and here.)

Mr. Weill's suggestions would go a long way toward fixing our broken financial system and giving us a shot at prospering once again.

Note:
We are obviously not defending Weill's horrific past actions, and he
failed to mention prosecuting fraud, which is perhaps the most important action we can take to help the economy recover. And we believe that bonuses and ill-gotten gains should be clawed back from every Wall Streeter who committed fraud.

However, we take our allies where we find them. And
on the points he raised today, Mr. Weill' is on the same side of the
fence as all of the top independent economists and financial experts.

 

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Thu, 07/26/2012 - 13:56 | 2653841 randomdrift
randomdrift's picture

I disagree with the basic thesis of this article: Yes. Increasing predictability would improve the economy but the fundamental problem is globalization.

The diversity-stability hypothesis has been taught to everyone and is believed by many people but it is exactly the antithesis of the truth:  Larger and more complex systems are less stable not more stable. That was first definitively proven by Robert May in the mid-1970s. That applies to economic systems and electrical systems as well as to ecological systems. It is a general property of systems.  

What needs to be done, is to reduce the connectedness of the world's economy, so that it becomes several smaller economies instead of one huge economy. That would stabilize it.

However, one of declarations at the Biodiversity Convention, now more than twenty years ago, was to move to a controlled world economy.  That is precisely what the world powers caused to happen, by increasing globalization. That made the world's economy unstable and necessitated control by the central bankers. Today, they have to continuously keep propping it back up, as it falls over one-way-or-another.  That will continue to happen, until we return to a fundamentally stable system.  

Thu, 07/26/2012 - 11:33 | 2653342 lilimarlene1
lilimarlene1's picture

Becky Quick! Hah. She introduced him and started to say philanderer but switched to philanthropist.

Thu, 07/26/2012 - 12:50 | 2653641 bonddude
bonddude's picture

This guy comes to his wine country bunker and parties like a rock star with other snots. Did anyone hear Kominsky rip his ass this morning? He dumped $785MM of Citi while pumping the program and fucking all of his employees. What a fuck. "But I've been sooo charitable." Wow what a douchebag.

Thu, 07/26/2012 - 13:45 | 2653826 clawsthatscratch
clawsthatscratch's picture

ahh we played too loose with your money....give us only half to play with it this time, we will be more careful, promise ;)

Thu, 07/26/2012 - 11:44 | 2653381 lilimarlene1
lilimarlene1's picture

I also love the way she pretends that she didn't know what he was going to say. Oh wow, surprise, surprise! Shocked. How radical.

Thu, 07/26/2012 - 15:28 | 2654136 Taterboy
Taterboy's picture

George Soros:"If I had a son he'd look like Sandy."

Thu, 07/26/2012 - 11:11 | 2653251 larz
larz's picture

there seems a bell curve of human behavior I believe the "betas"dwell in the bell. then there is the tail of so called gammas who dont want to sit in a cubicle yet have no desire to control anything, in truth they just want to be excellent for the pure sake of excellence THEN there is the "alpha" tail, written about in a very well presented article on ZH about sociopaths in Gvmt and by default C levels in crony capital companies (this article had to be well presented to avoid tin foil hat-ism). Sanford Weill deserves to be in prison for gaming the system for his own ends.  The ends do NOT justify the means at the expense of people who just want to exist in the bell curve and do an honest days work for an honest paycheck. This man and those of his ilk should be in jail for theft period.  Instead he is lionized fawned over by starry eyed cnbc "reporters"and given awards it turns my stomach. Until we choose to avoid this alpha preditor trait on an individual basis or we are able as a society to punish the perps equitably,  I am off grid only because I dont know how to even begin to make a difference for the better.  Once again good luck y'all.  btw the same distribution is observed in rat populations so until we rise above rodents.......

Thu, 07/26/2012 - 10:38 | 2653108 Zola
Zola's picture

And in America a lot of people are armed. When the bankster open hunting season kicks off , the crooks will not be able to hide. They know it and are afraid. However , i do agree with the points he raised. A lot of people indeed trying to get their get out of jail free card. It does sound to me that Nuremberg-like trials will be needed to avoid Vigilante justice

Thu, 07/26/2012 - 12:42 | 2653617 Winston of Oceania
Winston of Oceania's picture

How to Cook a Bankster by Iwas Skrewed author of the best seller Laywers; They're What's for Dinner

Thu, 07/26/2012 - 09:54 | 2652926 qussl3
qussl3's picture

Slippery bastard is in cash or USTs and is looking to get back in the game.

Thu, 07/26/2012 - 09:53 | 2652916 spanish inquisition
spanish inquisition's picture

My Tin Hat Theory

Hmmm.. Lifetime member Council of Foreign Relations, Former NY FED director. The last thing a Central Banker should do is to tell you the truth.... So collapse is imminent if he is speaking the truth, or he is lying to do something else.   http://www.wikihow.com/Detect-Lies

What will the roll back accomplish? It will clear out the overhead. If you are in the NY mob and and it grows so everyone else is in the mob, your profits are going to go down. There are fewer people to actually pay the vig/ protection/ extortion and it is spread out over more underbosses.

Bernanke's QE/twist stall tactics may have worked if US still had 30%-40% manufacturing to pull us out. Not gonna happen at 15%. Resetting the banking laws will lessen the cost of regulatory capture, economists, procecutors and politicians for the money masters. They can regroup and start anew. I don't expect the politicans to go down without a fight.... Approval cuts off the financial money tit....

That was my Tin Hat Theory for Thursday, July 26,2012

Thu, 07/26/2012 - 11:27 | 2653314 lilimarlene1
lilimarlene1's picture

Yeah, what he said!

Thu, 07/26/2012 - 09:44 | 2652867 MrBoompi
MrBoompi's picture

Bankers only see the light after they have retired from banking.  We need to hire bankers that have morals and ethics to begin with, something very rare these days.

Thu, 07/26/2012 - 09:23 | 2652802 synsolve
synsolve's picture

Mark to mkt? 15 x leverage? Transparency? MEDIC ! MEDIC !

Don't you just love it when the theiving bastards get religion? After, of course,

they've grabbed theirs.

 

Thu, 07/26/2012 - 11:32 | 2653339 JimBowie1958
JimBowie1958's picture

15 x leverage sounds too high to me.

That is like 6.7% of the loan covered in colateral? Does that make sense?

Hell, loan me a couple million at that kind of leverage and I will be a milionare within a year (God Willing, of course).

But I dont see how a bank can justify that kind of risk.

Thu, 07/26/2012 - 09:20 | 2652796 tradewithdave
tradewithdave's picture

I guess the old saying "Once burned, twice shy" doesn't apply to everybody.  There are people that lose their sense of touch and I guess their sense of smell of burned skin also.  There are also people who still sit in the front row at shows like The Harlem Globetrotters and Sea World. 

http://tradewithdave.com/?p=11195

Dave Harrison

 

Thu, 07/26/2012 - 09:15 | 2652782 PulpCutter
PulpCutter's picture

Author of Republican "Deregulate the Banks" plan, Phil Gramm, say HE didn't cause the financial crisis.

 

http://www.bloomberg.com/news/2012-07-26/breaking-up-banks-won-t-make-th...

 

Phil Gramm, the former U.S. senator who helped write the 1999 law that enabled the creation of financial giants such as Citigroup Inc. (C) and Bank of America Corp., said his legislation didn’t make the system any riskier.

The Gramm-Leach-Bliley Act repealed the 1933 prohibition against federally insured depository institutions combining with securities firms and insurers. While his law allows deposit- taking banks to affiliate with securities firms through holding companies, depositors and taxpayers are protected because affiliates can’t take capital out of the banks, Gramm said in a telephone interview yesterday.

Enlarge image

Former U.S. senator Phil Gramm, seen here in a file photo taken in 2002, said yesterday, “Under the law the depositor would not have been affected by a failure of their security affiliate because they weren’t allowed to co-mingle capital.” Photographer: Dennis Brack/Bloomberg

“I don’t see any evidence that allowing them to affiliate through holding companies had anything to do with the financial crisis nor has anybody ever presented any evidence to suggest that it did,” said Gramm, 70. Companies that failed such as Lehman Brothers Holdings Inc. “tended to be narrowly focused.”

Sanford “Sandy” Weill, who created Citigroup and pushed for the Gramm-Leach-Bliley Act, said yesterday on CNBC that he would now support dismantling financial holding companies.

“What we should probably do is go and split up investment banking from banking,” Weill, 79, said in the interview. “Have banks do something that’s not going to risk the taxpayer dollars, that’s not going to be too big to fail.”

Thu, 07/26/2012 - 09:04 | 2652733 nick howdy
nick howdy's picture

Now I'm watching Chris Dodd on CNBC..What lying piece of shit..He pretends that it was he and Frank who wrote this monster and not the banks, what a joke...

He states "Jamie Dimon agreed with 70 or 80% of the bill". So Chris you have a thief saying that he likes the bill and somehow you think you should be able to pass yourself as a legitamite human being...

Chris and Jamie need to be sharing a jail cell...These people obviously don't realize that everyone knows how full of shit they all are.

Thu, 07/26/2012 - 10:51 | 2653166 Widowmaker
Widowmaker's picture

Dodd Frank, or Frank Dodd - it's all FRAUD!

Thu, 07/26/2012 - 09:01 | 2652716 Zero Govt
Zero Govt's picture

Mr. Weill's suggestions (3 point plan) is yet another bloody mindless and futile effort to introduce rules on how others should run their business

Weill could dive into the mountains of rotting legislation any day of the week which DO NOT WORK and have NEVER WORKED

We are seeing the absolute and complete failure of Law and Regulation but Weill is just fuking clueless

In fact Law is not just failing to compete it's task of either prevention and retribution, it's actually ADDING and contributing to the problems of finding a solution ...which is the Free Market (no rules required)

Weill is old, tired and utterly stupid.. the 'Era of Law' is walking dead, like Mr Weill

Thu, 07/26/2012 - 09:06 | 2652744 Eddy Vluggen
Eddy Vluggen's picture

A "free market" is not another word for "lawless" or "anarchistic" market. It means you're allowed to trade freely, not that there's no rules at all.

Thu, 07/26/2012 - 09:02 | 2652695 Winston of Oceania
Winston of Oceania's picture

Mubarak's little brother?

Look at the fear in his eyes, he know's that he will likely be eaten by the mobs he helped create. He has nothing to lose trying this and perhaps he will be passed over, perhaps... Nom nom nom, roasted bankster, mmm.

Thu, 07/26/2012 - 08:40 | 2652652 Ned Zeppelin
Ned Zeppelin's picture

My guess is this piece of shit has an enormous short position on.  The sudden acquisition of religion? Not buying it.

Thu, 07/26/2012 - 08:30 | 2652627 GMadScientist
GMadScientist's picture

Fuck that asshole. Book him as an accessory after the fact and move on to the next white-shoed pinhead.

Thu, 07/26/2012 - 08:23 | 2652611 buzzsaw99
buzzsaw99's picture

Weill can eat shit and die.

Thu, 07/26/2012 - 08:20 | 2652602 madcows
madcows's picture

If they mark to market, everyone knows they are bankrupt.

They can't reduce leverage to 12-15, because that requires them to eliminate half their loans.

And that can't be transparent b/c then the real truth would come out.

Extend and pretend until it all comes tumblin' down.

Thu, 07/26/2012 - 12:08 | 2653487 DaveyJones
DaveyJones's picture

Sandy was caught watching this video before the clip

http://www.youtube.com/watch?v=JmZBOY6Mczk

Thu, 07/26/2012 - 08:39 | 2652648 anarchitect
anarchitect's picture

True. And in the case of over-the-counter derivatives, the question is mark to WHAT market? There is $1 quadrillion, give or take a few hundred trillion, notional value of these things in the financial system.

Thu, 07/26/2012 - 08:14 | 2652589 Derp2012
Derp2012's picture

So, now that the horses are all safely out of the barn and down the street at our private ranch, it's time to close the door?

Next up: we'll generously loan you some new horses to recapitalize your barn.

The banking system is a dried up husk, through leverage, fraud, and 'innovation', the capital is gone.  Wake me up when he proposes a plan to figure out where it went and how to get it back.  

Thu, 07/26/2012 - 07:40 | 2652485 PMakoi
PMakoi's picture

Almost Grunchtime when the people that got us into this mess come out from behind the curtain and proclaim their solution.  The Sheeple are grateful.  Power is centralized.  The Banksters crimes forgiven, their books cleared at our long term expense.... life goes on again on their terms.

NO NO NO!  We mustn't let them cow us.  We oughtn't to be suckers now.  The TBTF banks SHOULD take their losses.  Bonuses should be clawed back. Crimes need to be prosecuted and the guilty punished.  AND, going forward, banks absolutely should pay a percentage of every taxpaying American Citizen for as long as it takes to pay the trillions of dollars back!!

Thu, 07/26/2012 - 07:23 | 2652438 Bartanist
Bartanist's picture

Maybe he and the other greedy dirtbad bankers have come to the realization that they can either reform on their terms or have Obamie-the-commie and his REAL backers execute them during the purge after the "cultural" revolution.

Thu, 07/26/2012 - 08:28 | 2652622 covert
Thu, 07/26/2012 - 06:55 | 2652365 max2205
max2205's picture

The banksters know that this is the only way they will survive longterm.

Plus the bad part stays with the taxpayer and well the good part gets spun off at FB multiples.

Any breakup proposed will result in zero retribution and maximum self interest.

Amazing how they ways win.

Thu, 07/26/2012 - 06:45 | 2652344 overmedicatedun...
overmedicatedundersexed's picture

that this evil SOB, could say this NOW, and not at the same time be slitting his wrists or driving a sword across his belly, means that he is not honest in the least..one does wonder, why now? and quo bono?

let's remember colorado and the waste of ammo on the tax units. perhaps he sees a future there.

Thu, 07/26/2012 - 12:36 | 2653593 dirtbagger
dirtbagger's picture

It is time to apply some Old Testament justice to these swine.  The New Testament idea that a low life theiving scum like Weil can confess his sins and expect forgiveness is just not right.

Thu, 07/26/2012 - 06:31 | 2652330 michigan independant
michigan independant's picture

Even Capone supplied soup lines. Capone lamented one thing that he did not control the wholesale milk supply for the Chicago area. Never in any generation trust your money with the bank. Is he joining the human race? I have no idea...

Thu, 07/26/2012 - 06:53 | 2652310 NuYawkFrankie
NuYawkFrankie's picture

The PERP Proposes The Solution  .....    UUggghhhh???????

So Sandy The Scumbag (STS), the Godfather of everything that is wrong with the banking system, NOW wants to propose a solution?  Is this some kind of sick joke???

Now tha $20Trillion has been purloined by STS-birthed  TBTF's (with a hefty chunk going to STS's CitiCorp); now that your future - and that of your progeny as far as the eye can see - has been stolen by STS and his buddies (like Slick Willies Treas Sec  Robert Rubin - appointed as head of Citi for allowing the illegbal-at-the-time merger of Citi & TRavellers) ; now that  the Global Economy is on  the  brink  caused in large measure by thes same Banksters -....   STS's solution is to (after the fact) break 'em up - now that  The Deed Has Been Done and  theyve stolen almost everything out there -  and to let these these same criminals scam, gamble, leverage, game-the system, with ONLY 15 TIMES the money belonging to their depositors - money that does not exist,  but as a figment of their fevered imaginations.

 Do these people ever show one iota of remorse? Is there ever a hint from  these people that they might EVER have been wrong? Do these people ever admit to even miniscule responsibilty?  WILL these people EVER learn? Finally, have these people no shame?

NO! NO! NO! NO! and DEFINITELY NOT!

The  unfathomable hubris; the bare-faced effrontery; the unmitigated gall; the glib, smirking in-your-face dissembling and obfusction by these Architects of Destruction - by these people - is indeed Something to Behold for The Ages.

 

 

Thu, 07/26/2012 - 08:43 | 2652659 Ned Zeppelin
Ned Zeppelin's picture

totally concur while he says, now, the right things, you cannot trust these guys.

Thu, 07/26/2012 - 05:56 | 2652306 Colonial Intent
Colonial Intent's picture

+100 for the article except for...................

Mr. Weill' is on the same side of the
fence as all of the top independent economists and financial experts.

He's just doing his mea culpa.

 

Thu, 07/26/2012 - 04:31 | 2652265 silverdragon
silverdragon's picture

Silver is moving up, even though its just the paper spot price I can not help but smile when I see it going up.

Thu, 07/26/2012 - 06:57 | 2652241 falak pema
falak pema's picture

Oh repentance, thy name is to be cherished. 

"Don't do what I did! Do what I say now!"

On the theme of repentance look at this photo of Santander's biggg boss, Emilio BOTIN,  announcing his corporate profits are down to near zilch as the GOVERNMENT has obliged him to provision bigtime for upcoming losses!

For the FIRST time a spanish Oligarch is being obliged to mark his bank P&L to market, instead of skimming the "phony" profits off as dividend, knowing full well in the end his corporate mega losses will be socialised by government as he is TBTF!

This shill needs to be strung on the lampost! Just watch the expression on his face! 

Espagne : la banque Santander perd la moitié de son bénéfice

Thu, 07/26/2012 - 03:06 | 2652230 cynicalskeptic
cynicalskeptic's picture

Citi has gone bankrupt and been bailed out once a decade for the last 40 years....it only recently came out that the Fed bailed them out on their Latin American loans.......  Citi has been the TBTF poster child for years.

 

http://www.cjr.org/the_audit/an_alternate_history_of_citigr.php?page=all...  

 

— 1982: Citi and other banks get a backdoor bailout via aid to defaulting Latin American countries

—1986: Sandy Weill (and Jamie Dimon, Robin to Weill’s Batman) buys predatory lenderCommercial Credit Corporation, beginning an empire that will later become Citigroup

—1988: Weill buys Primerica, a sketchy multilevel-marketing (pyramid style) firm that sells term life insurance

— 1991: Salomon Brothers, which Weill bought in 1988, pays a $290 million settlement in a Treasury bond scandal *

 

check the link above - there's SO much more.......   both before and after.....

Thu, 07/26/2012 - 02:52 | 2652214 MiniCooper
MiniCooper's picture

I agree with everything Sandy Weill said.

The worry I have is that if Washington did move ahead and force the break up of the banks, force true mark-to-market and impose Glass Steagle II that Wall Street banks would still have so much influence that it would all still happen on their terms and in a way and on a timescale that was to their choosing.

In my view, the next leg of the crisis will evoke such revulsion among the people that politicians will HAVE to react and that it will be impossible for Wall St to stop it. Even so, delaying the implementation for another 5 years and influencing the terms on which it happens still is a very valuable option. A lot can happen in five years and another Presidential election gives Wall St another chance to influence the implementation again. Its another form of kicking the can.

Sandy Weill did say the right things. Now I would like to see him and other people with influence put forward a plan that coudl be implemented quickly and really works for everyone - borrowers, lenders, business, brokers, market operators, banks.

Thu, 07/26/2012 - 10:57 | 2653184 Widowmaker
Widowmaker's picture

Cooper you have to look at that thief like a thief. 

What he did NOT say was anything having to do with fraud -- which is epic and institutionalized.  Trust-busting only hides the bodies.  His premise is loaded and pointed at the theater crowd.

FRAUD FRAUD FRAUD! 

That is it, that is all.  They will talk about ANYTHING except truth.

Thu, 07/26/2012 - 09:17 | 2652786 Benjamin Glutton
Benjamin Glutton's picture

Lost in collective observation is that Mr. Vile wants to abandon Dodd/Frank while restoring G/S. Though I am not totally up to speed on D/F it seems to have ended the primacy of TBTF given the political resolve to use its authority. But alas therein lies the rub. Faced with choice instead of absolute directives our leaders invariably choose poorly.

Thu, 07/26/2012 - 02:07 | 2652189 keeping appearances
keeping appearances's picture

Jack Abramoff and now Sandy Wiell reprenting?  Oh come now.  Sandy was paraded out there to appease the masses so they're won't be an open season on bankers when the system crashes....  It's gonna collapse.  He and his ilk are very worried how the masses are going to react.

Thu, 07/26/2012 - 12:36 | 2652550 Widowmaker
Widowmaker's picture

Make no mistake about it, Weill is trying to re-author history.

He knows damn well that he created a monster that has utterly destroyed countless lives and brought countless risks upon themselves, their families and nations worldwide.  He authored, promoted, and sold the roadmap of the financial-damned to the vulnerable.

The Bastille will need all the help they can get, Mr Weill is the same TBTF fraud-preaching faggot he ever was.  His closet is packed with skeletons and tears and his bank account reflects the bonuses from each and every one.

He has Krasting-Symplex, where after you have more money than brains you try and act like money IS brains and you have all the answers.  It's easy yelling down at the poor Muppets from a mountain of ill gotten gains, eh Sandy?

Thu, 07/26/2012 - 07:30 | 2652452 Bartanist
Bartanist's picture

He shoul;d be afraid, but not of the masses or you and me. The battle lines have been drawn with this election and the banks have dropped Obama and are all backing Romney. While ultimately I understand the two prty system is a complete scam, Obama is a different animal with much larger goals for an American cultural revolution like the Bolsheviks or Mao... and him as dictator for life.

If he is not stopped.

Thu, 07/26/2012 - 06:41 | 2652337 Mitzibitzi
Mitzibitzi's picture

Yup. Same reason we've had Tony Blair flapping his gums about 'hanging bankers not being the solution' on this side of the pond. Apparently to anyone who'll point a camera his way, the past week or so.

Thu, 07/26/2012 - 07:31 | 2652460 Bartanist
Bartanist's picture

Curious whether he was able to come up with any logical reason as to why hanging bankers was not the solution? Was it because that would harm his lifestyle, or did he just not say?

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