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Breaking Up the Banks? . . . Just a Start

Posted by Larry Doyle on July 26, 2012 6:50 AM |

The news yesterday that once renowned banker Sandy Weill has called for the breakup of the now “too big to fail” banks is treated as some sort of earth shattering news development. News? Really? “Sandy, where ya’ been, my man?

In the neighborhood of my youth, news of that sort was typically used to wrap the daily catch down at the local pier.

While those on the airwaves may care to direct a measure of respect to Mr. Weill, the call to break up the “too big to fail” banks is little more than yesterday’s news. Who made this call early on? 

Simon Johnson and James Kwak (whom I interviewed in April 2010) made the case to break up the banks in cogent fashion in their fabulous tome 13 Bankers published back in early 2010. I have not only echoed Johnson’s and Kwak’s call often here at Sense on Cents (Sense on Cents/Break Up the Banks), but I called for the reinstitution of Glass-Steagall back in 2009.

Aside from Jamie Dimon, who in America truly believes that banks that are “too big to fail” are not also “too big to manage”, “too big to trust”, and ultimately “too big to exist”?

With little meaningful debate necessary regarding breaking up the banks, the real questions needing to be addressed include the following:

1. Execution: how does the splitting up of these behemoths occur? There will be a lot of moving parts to this equation.

2. If we are to break up the banks, then let’s also break up and discard a regulatory system that has shown itself inept and “too weak and too incestuous to work”. The days of self-regulation in the financial industry should be numbered. We have more than ample details to accept this fact as self-evident.

Recall that none other than the Project on Government Oversight made this call also back in early 2010. I highlighted POGO’s call in writing, Is FINRA’s Future in Doubt?,

Are the days of Wall Street’s self-regulatory organization known as FINRA numbered?

In the opinion of the very credible Project on Government Oversight, they should be.

3. If we are to disassemble the banks and regulators, then the last entity engaged in the incestuous conduct that has crippled our nation also needs to be dealt with in appropriate fashion. Should we overthrow Washington? Not literally, perhaps, but we should certainly eliminate those pols in Washington who gorge themselves at the Wall Street trough.

This question may be addressed easier by highlighting those pols without a feedbag. While we take the pols out to slaughter, let’s also stop the revolving door that has catered to the sows who work their way back and forth between Washington and Wall Street.

Too much to take on? Come on. You think our forefathers shuddered in the face of challenges.

Real change does not come by merely talking about it. The ideas once planted can easily snowball if people get on board and demand they happen.

Time to start be a little more demanding around this country.

Larry Doyle 

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

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