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The Man Who Shattered Our Economy

Posted on Nov 17, 2010
AP / Louis Lanzano

Sandy Weill, then CEO of Citigroup, exits Carnegie Hall where the annual shareholders meeting was held on April 18, 2006, in New York.

By Robert Scheer

Rejoice, the housing market is back. Sandy Weill just picked up a humdinger of a wine vineyard estate in Sonoma, Calif., for a record $31 million, so the foreclosure crisis—which the former CEO of Citigroup did so much to create when he successfully lobbied then-President Bill Clinton to sign off on radical deregulation of the banking industry—must be over.

After all, Weill wasn’t desperate for shelter, already being in possession of a 14-acre estate in über-exclusive Greenwich, Conn., and a 120-acre spread in New York state’s Adirondacks. Let’s also not forget the penthouse that he bought for $42.4 million in New York City in 2007 as the banking collapse he helped engineer was fast developing. Not too shabby for a guy who ran Citigroup into the ground by trafficking in what proved to be toxic mortgage-based securities. 

Thanks to legislation that Weill got President Clinton to sign off on, Citigroup was allowed to become too big to fail, and when fail it did, the taxpayers had to bail the humongous bank out—to the tune of $50 billion in a direct subsidy and $306 billion more for the housing mortgage-backed securities Citigroup was holding. The Treasury still owns a good chunk of Citigroup common stock, now trading at a paltry four dollars and change per share.

However, like all of the other top dogs involved in this scandal, Weill has emerged from a housing crisis that has impoverished tens of millions of Americans with his own personal fortune intact. Indeed, as evidenced by his vineyard purchase, he has quite a bit of money to throw around. 

Although the value of most housing in Sonoma County, in the heart of the wine country, is down 30 to 50 percent, Weill was willing to pay close to the asking price for his new property. And why not? As the San Francisco Chronicle website quoted one Coldwell Banker real estate agent as saying, the sale “is not an indicator of an emerging real estate recovery, but rather the ability of the world’s wealthiest individuals to buy what they desire.”


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Some guys have all the luck, particularly when they supply the dice. There would be no housing crisis were it not for radical financial deregulation legislation that Weill and other Wall Street hotshots got Clinton to approve. First Weill engineered a merger of the Travelers insurance company, which he headed and which included investment banking in its portfolio, with the commercial banking entity of what was then Citicorp. That merger would have been judged illegal because of the Glass-Steagall legislative barrier to merging investment and commercial banking that President Franklin Roosevelt signed into law to prevent another Great Depression, but Weill got the law changed to accommodate his plans. 

Boy, was Weill ever persuasive, not only enlisting the bipartisan support of Washington politicians but the enthusiastic backing of the establishment media. As The New York Times editorialized back in April of 1998 in praising the merger: “In one stroke Mr. Reed [John Reed of Citigroup] and Mr. Weill will have temporarily demolished the increasingly unnecessary walls built during the Depression to separate commercial banks from investment banks and insurance companies.”

A Times news story that same day also read like a Wall Street lobbyist’s press release: “In a single day, with a bold merger, pending legislation in Congress to sweep away Depression-era restrictions on the financial industry has been given a sudden, and unexpected, new chance of passage. … Indeed, within 24 hours of the deal’s announcement, lobbyists for insurers, banks and Wall Street firms were huddling with Congressional banking committee staff members to fine-tune a measure that would update the 1933 Glass-Steagall Act separating commercial banking from Wall Street and insurance. …”  Notice the Times’ use of “update” to mask what was a clear reversal of the law. 

It helped that former Goldman Sachs honcho Robert Rubin was Clinton’s treasury secretary, and after the bill was passed, Weill rewarded Rubin with a $15-million-a-year job at the new Citigroup, which was now legal, thanks to the legislation Rubin had helped pass. When Clinton signed the bill reversing Glass-Steagall and making the Citigroup merger legal, he gushed: “Today what we are doing is modernizing the financial services industry, tearing down those antiquated laws and granting banks significant new authority.” Clinton then handed Weill a pen he used in signing the bill, and that pen ended up framed on the wall at the CEO’s office near a plaque that paid tribute to Weill as “The Man Who Shattered Glass-Steagall.” And shattered our economy as well. His are the grapes of wrath.

Click here to check out Robert Scheer’s new book,
“The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street.”

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By DBM, November 17, 2010 at 9:09 am Link to this comment

Profmarcus:  “... should we hold the bankers accountable…?”

Ooh! Ooh!  I know this one!!!  ... YES! Yes, they should be held accountable. 

No doubt any attempt to do so would be buried under a well funded deluge of lawyering about standing and jurisdiction.  Then “justice” would have to clear the hurdle that much of what was done had been rendered at least semi-legal due to a deluge of well funded lobbying of law-makers.

It’s a very high bar ... but one which would have to be cleared for justice to prevail.

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Fat Freddy's avatar

By Fat Freddy, November 17, 2010 at 9:07 am Link to this comment

First of all, Glass-Steagall was not reversed. Only a part of it was repealed in Gramm-Leach-Bliley. (So, much for truth in reporting.) If Glass-Steagall were repealed, Wal-Mart could open banks in their stores. Also of importance to note, GLB was a compromise. The other side of which was the Community Reinvestment Act (CRA).

Second, there is no such thing as “Too Big To Fail” or “Systemically Important”. That is a lie, created by bankers. But if you say it enough times, it will be true.

Of course, GLB created a huge conflict of interest in banking. These same bankers are constantly on CNBC pushing stocks which they have vested interests in. It’s called “Pump and Dump”. Sort of like what the government is doing with the GM IPO. However, to say it was the “cause” of the housing bubble is naive, at best. Both Austrians (on the right), and Post-Keynesians (on the left) will tell you that when interest rates are kept artificially too low, for too long, there will be an investment bubble. If it wasn’t in housing, it would have been somewhere else.

The problem is, our entire economy, no, the world economy, is based entirely on debt/credit. The economy does well when people are borrowing money. Actual spending has little to do with it, anymore. The Federal Reserve was created to control this debt/credit cycle, but it has failed miserably, with one mistake after the other. The mistakes of the FRB are only revealed in hindsight. That means it is impossible for the FRB to effectively control the economy, in general.

There was a time when saving money actually meant something. I can remember my Grandfather telling me, “you won’t get anywhere in this world if you can’t save money”. Now, it’s debt. You won’t get anywhere in this world unless you can borrow money. That means, you must work, to build credit. Once you build credit, you can borrow. Then, you must work to repay your debt and maintain your credit, so you can borrow more money. Savings is no longer part of the equation.

Look, everybody in the industry knew that mortgage backed securities were shit. They turned it into a game of “hot potato”. Whoever was stuck with MBSs when the market froze, was the loser. Citi, and the major banks got stuck with a lot of them. They are the losers, and should be forced to liquidate. The FRB and Treasury could have given the “bailout” money to the new owners of the liquidated assets, and temporarily increased the FDIC limits. But because the major banks literally own the FRB, and the Treasury department is full of ex- big bank managers, they invented “Too big to Fail”.

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By G.Anderson, November 17, 2010 at 8:58 am Link to this comment

One way or another we the people of this country are in for one he’ll of a fight.

If we don’t then we’ll end up trying to eat weeds and bugs just to stay alive. And when
that day comes you can count on one thing, the only help we will get will be from each

The plutocracy views the American people as their enemy, along with the people of
Afghanistan, and Iraq.

Because of their greed this country now begs for spare change from communist China.

Meanwhile their toy government, paves the way for more larceny. The hour grows
short. And unless these days are shortened none shall survive.

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By par4, November 17, 2010 at 8:28 am Link to this comment
(Unregistered commenter)

The corporatists (Fascists) are winning because there is no opposition political party. The liberals here are as useless as the liberals in the UK. Obama, Pelosi,Kerry,Schumer et al are in bed with these criminals and reaping the same profits.

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By profmarcus, November 17, 2010 at 8:23 am Link to this comment

it’s hard for me to accept that we’re actually having a debate about holding crooks accountable… otoh, why should we hold the bankers accountable when our elected leaders flout the constitution with impunity…? why should the banksters be subject to the rule of law when our ex-president is going around bragging that he authorized torture…?

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By S. Barksdale, November 17, 2010 at 8:23 am Link to this comment
(Unregistered commenter)

Sasquatch is right.  Of course these theives should be held accountable, including President Clinton.  If this president has so little foresight as to sell his country down the river at the urging of wealthy wheeler-dealers he should have to relinquish his fortune as well.

Sandy Well comes off as a sick individual.  All the money in the world wouldn’t satisfy him.  His type of greed is damnable and damning to a vast number of Americans.  No one man should weild this much power and we should not hesitate to wipe that smug smile from his face!

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godistwaddle's avatar

By godistwaddle, November 17, 2010 at 7:34 am Link to this comment

Who’s this “we,” Sasquatch?  Sorry, the fix is in. The bankers and the corporatists own EVERY U.S. government, AND THERE’S NOTHING WE CAN DO ABOUT IT.

Elections DO NOT matter.  Grab your ankles, ‘cause the banks gonna gamble and we’re gonna bail ‘em.

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By Sasquatch, November 17, 2010 at 6:38 am Link to this comment

We need to hold these people accountable, fine them
extreme amounts of money, impound these properties,
sell them and make a fund that all the people who are
unemployed because of their actions can use to get back
on their feet again.

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