Pandit: Glass-Steagall isn’t the way to rebuild banking
John Reed, one of Vikram Pandit’s predecessors as chief executive of Citigroup, has been saying recently that Congress made a mistake in repealing the Glass-Steagall Act, which separated the banking and investment industries. Pandit, however, doesn’t think reinstating the Depression-era law is a good idea. He told a group of Washington University students on Monday that securities underwriting — the activity that Glass-Steagall kept out of the banking system — wasn’t the problem in the recent financial crisis. Proprietary trading — making leveraged market bets with the bank’s own money — was the dangerous activity this time around, Pandit said:
It makes sense to me to say you don’t take deposits as an institution and turn around and run a hedge fund. That’s the new form of Glass-Steagall to me. … If the business plan is around client facilitation, a client-centered strategy, firms can be in those (securities) businesses and the regulators can agree to let it run. Underwriting is not the thing that took this market down. It was a lot of highly leveraged balance sheets, a lot of assets on the books that were non-core assets. … What we have to focus on is, if you raise deposits, how do you invest the assets on the other side of the balance sheet.
In an interview, Pandit stopped short of saying that Citigroup would abandon proprietary trading, but he did say that “We have cut back on that in an enormous way.”
Citigroup is about 25 percent smaller than it was before the crisis, having sold about half a trillion dollars’ worth of non-core assets. Pandit said he’s not sure when the bank will be able to repay the $45 billion it got from the U.S. Treasury’s Troubled Asset Relief Program:
We have a couple of objectives here. One is to make sure we repay TARP with a great note of thanks and a rate of return (for the government). I don’t have a timetable, except fot the fact that their (regulators’) timetable is my timetable.
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David Nicklaus has covered St. Louis business for more than 25 years. His column appears three days a week on the Post-Dispatch business page. 
The idea of a financial “supermarket” either at the consumer level or at the corporate level of finance is the “Holy Grail”. Unfortunately, those who try obtain this act more like the Monty Python actors fighting the Frenchmen in the castle. Citi and B of A are both suffering from trying to be all things in the financial marketplace. The only companies to do this well are JP Morgan and Goldman. Both have a strong culture at managing risk that that is missing in Citi, B of A, and Morgan Stanley.
There was also no regulation by the Government. The bankers are smarter than the regulators. Bring back the Glass-Steagall Act,to separate the banking and investment industries.
Pandit would certainly know, after recieving a bailout, not turning around the company, and facing disaster within 24 months.
Bust ‘em up and stop these mega-behemoths from growing to such size–it ruins competition, kills jobs, and leads to excessive industry risk. Certainly the larger they are, the more chance they have of getting their way…and requiring taxpayer assistance when they get it wrong. A government bailout is NOT a characteristic of the free enterprise system, so let’s stop clinging to the idea that that’s what we have. Our regulatory agencies dropped the ball. We all know the dynamics in Washington. [Fools like me were told we needed Big Government to police Big Business. It's a problem when they're one and the same.]
Pandit and his fellow banksters are the terrorists that will destroy this country long before any Islamic extremists.
It’s time to raise the black flag and start slitting some throats.
He is right “underwriting is not the thing that took this market down,” it was the underwriting guidelines. The guidelines for lending where lowered to such a point that all an individual or business had to do to get credit was spell “cat” and be able to “sign here.” Most of this mess was inspired by AIG through the creation of “credit default swaps,” a highly complex crap shoot with the appearance of respectability. Reading this article reminds me of the story, “The Emporer has no Cloths,” we all see problem; break up these to big to fail institions now. Reinstate the Glass-Steagall act, make banks banks again and let the investment firms be investment firms. Let’s get back on track again. I am so sick and tired of these guru’s of Wall Street talking about “Client Focused Strategy, etc.” what does that really mean. Let’s face it, these ivy league, over-educated masters of the universe have propelled double talk to a level that out shines anything P.T. Barnum ever could conger up.