Jesse Eisinger makes the point that Sandy Weill isn’t the only ex-big-banker to suddenly have a change of heart:
His belated conversion is only the latest from the “corner office to Zuccotti Park” banking crowd. The former merger aficionado Philip J. Purcell, who headed up the pithily named Morgan Stanley Dean Witter Discover, wrote a recent Wall Street Journal opinion article suggesting that shareholders should break up the banks. Sallie Krawcheck, a former top-ranking Wall Street executive, recently criticized big banks. Two other former top executives, David H. Komansky and John S. Reed, have attacked the current financial system.
These converts tend to have followed a similar path. They participated in the merger frenzy and pushed deregulation when the getting was good. They departed from finance’s sweet embrace sometimes involuntarily, ousted in power struggles. And they stayed quiet, or did little, throughout the debates on how to fix the system when the nation was struggling over the Dodd-Frank financial regulatory overhaul. [Emph. added]
Also, as Steve Pearlstein points out in today’s Washington Post, they happen to be wrong. It’s not bigness that’s the problem, it’s too many bad loans. Prior financial meltdowns, which occurred as a result of everything from a proliferation of bad energy lending, to bad commercial real estate lending, to bad LDC lending, happened long before the creation of the mega-institutions that everyone is griping about. Again and again, financial institutions got themselves into trouble when the people who ran them thought it was a good idea to chase the latest trendy idea. Now, hearing Weill, Purcell, and the rest suddenly decide that the big banks need to be broken up, it’s hard not to wonder whether they’re falling into their old bad habits. . . .