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Legacy or insult: history has the say

There is no shortage of people who have achieved amazing heights in their careers, becoming great leaders and perhaps legends in their industry, and are bestowed honours, awards and praise, only to have their legacy tarnished or destroyed by a mistake or a later reflection by historians that they didn’t benefit the world after all.

Some make great efforts to try to repair their legacy so that history may either overlook the blemished areas or focus on their accomplishments. On July 25, the former chairman and chief executive officer of Citigroup, Sandy Weill, did just that by saying in an interview with CNBC, a top business television channel, that investment banks and commercial banks should probably be “split up”.

The reason why this may have seemed extraordinarily ironic or insincere, is that Weill is considered one of the most prominent figures in the abolition of the Glass Steagall Act of 1933, which for 65 years separated commercial and investment banking in the United States. In April of 1998, Weill, then CEO of Travelers Group, and John Reed, then CEO of Citicorp, announced a US$76 billion dollar merger of their companies that violated the act, and could only survive if within two years the act was repealed. In what history may judge as the greatest collusion of Wall Street and government, the 1999 Gramm-Leach-Bliley Act removed barriers in the market among banking companies and securities companies that prohibited any one institution from acting as any combination of an investment bank and commercial bank.

At a press conference announcing the merger, Reed famously said at the time: “Sandy called his friend the president ... so the president was in fact told last evening what was going to happen”. Weill and Reed then called on the then-chairman of the Federal Reserve, Alan Greenspan, who gave them assurances, the chairmen of the House and Senate banking committees who gave their blessings, and the Secretary of the Treasury Robert Rubin, who condoned the merger and joined Citigroup’s board a year later.

In what is being called “the best-financed campaign of influence-buying ever seen in Washington”, an estimated $300 million was spent by the banking, insurance, and brokerage industries on a lobbying campaign, which included political campaign donations, political party contributions, and lobbying of elected officials between 1997 and 1998 to ensure the act was overturned.

Weill would later say it was our “political triumph” to repeal “archaic legislation”, referring to the act in which he was a primary catalyst in dismantling. In his office, Weill proudly displayed a four-foot piece of wood engraved with the words “The Shatterer of Glass-Steagall.” Only 10 years later, Citigroup would becomes one of the main culprits of the Global Financial Crisis, requiring a bailout of $45 billion from the US government, and having to shed 50,000 jobs.

Reed has shown deep remorse and admitted: “We got it wrong.” He even went as far to say that they “created a monster” and that he feels bad for the people at Citibank and the stockholders. In a March 2012 interview he said that that Sandy was “not comfortable with that conversation” when he mentioned to him. “We didn’t do well.”

The dramatic change of heart by Weill, now 79 years old, may very well be a last ditch effort to repair his legacy. As a member of Time Magazine’s 25 people to blame for financial crisis, he can no longer deny he is was one of the primary contributors to the foundation of the Global Financial Crisis.

While some may question his genuineness, his very simplistic proclamation that commercial and investment banking should be separate has added substantial traction to the reform debate and may very well be the impetus needed for legislative action.

Anthony Galliano, Chief Executive Officer, Cambodian Investment Management, email anthonygalliano@covenantim.com

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