Friday, Nov 06, 2009

A bit late but at least this guy has the decency to admit his errors.

Bloomberg: Reed Apologizes for Glass Steagall Repeal, Building Citigroup

“I’m sorry,” Reed, 70, said in an interview yesterday. “These are people I love and care about. You could imagine emotionally it’s not easy to see what’s happened.” “I would compartmentalize the industry for the same reason you compartmentalize ships,” Reed said in the interview in his office on Park Avenue in New York. “If you have a leak, the leak doesn’t spread and sink the whole vessel. So generally speaking you’d have consumer banking separate from trading bonds and equity.”

Posted by tyrellcorporation @ 02:17 PM (1010 views)
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1. general congreve said...

“If you have a leak, the leak doesn’t spread and sink the whole vessel. So generally speaking you’d have consumer banking separate from trading bonds and equity.”

COMMON F4CKING SENSE, surely?

Friday, November 6, 2009 02:36PM Report Comment
 

2. charlie brooker said...

Can you think of a ship that claimed to be unsinkable and wasn't?

If you've seen Titanic, chances are you'll recall the bit where once the ship is strikes the iceberg the ship's designer admits the ship is mathematically bound to sink - to everyone's complete shock.

The lesson learnt there is that compartments must remain water tight however imbalanced the vessel.

Brooksley Born, where are you now?

Friday, November 6, 2009 03:35PM Report Comment
 

3. general congreve said...

"Yeah, actually thinking about it, now that we've lost everything betting the house on red, perhaps the high street banks shouldn't have been allowed to use depositers hard-earned cash, that had been intrusted to them for safe-keeping, to go gambling in Vegas to try and make a quick buck.", said Reed, 70.

Friday, November 6, 2009 03:45PM Report Comment
 

4. icarus said...

"And to show how sorry I am," he said, reaching into his pocket and pulling out $10 million in $100 bills, "take this".

Friday, November 6, 2009 04:45PM Report Comment
 

5. 51ck-6-51x said...

This guy's vision ( and that of Weiss ) wasn't all that bad if I recall, it seemed to have gone downhill due to actions since he retired in 2000 and others ( Pandit and Crittenden, I believe ) took over the behemoth and increased the risk inherent in it's operations ( such as the CDO's the article mentions - in particular holding onto the mezzanine tranches without proper valuation, yes in off balance sheet vehicles, but the risk was still theirs to bear. )

Friday, November 6, 2009 05:17PM Report Comment
 

6. icarus said...

Vision? The merger (or stock-swap) between Citicorp (Reed) and Travelers (Weill) was dependent on the repeal of Glass-Steagall. Without that there was little reason for the merger, especially since the two management styles were very different. Reed and Weill had an inside track to Robert Rubin, then Treasury Secretary, later CEO of Citigroup who in that role pushed for maximum balance-sheet and leverage expansion. Reed's and Weill's vision (or insider knowledge) seems to have been that the Act would be repealed. With Reed at the helm Citi ran a billion-dollar campaign in the late 90s (called 'Live Richly') to get people to increase their mortgage debt and take out second mortgages to spend on whatever they wanted.

Another example of 'vision' would be the derivatives specialists at JP Morgan who persuaded AIG in 1998 to start writing credit default swaps on CDOs in the late '90s.

Friday, November 6, 2009 06:16PM Report Comment
 

7. 51ck-6-51x said...

icarus.

- 'Live Richly': Nowt wrong with touting your own business! If I sell mortgages of course I'm going to try to sell more, especially if I can sell them on. The vision of which I speak was the way in which Citi was structured ( organisationally ); the downfall was increasing leverage ( keeping the riskiest tranche of CDO's ) - hence not selling on all of the mortgages, but concentrating their exposure to auto-correlation. I believe this exploded from 2000.

Mind you many will disagree as they do not agree with me that the free market is the Right Path for individual freedom and social prosperity.

Friday, November 6, 2009 06:35PM Report Comment
 

8. hpwatcher said...

"And to show how sorry I am," he said, reaching into his pocket and pulling out $10 million in $100 bills, "take this".

Which you then take, and add another $10 million and buy a slize of pizza and coffee...and get no change........

Friday, November 6, 2009 08:04PM Report Comment
 

9. icarus said...

666 - Citi and other Wall St banks played a big part in generating the over-lending crisis by their 'borrow-more' campaigns.

Free markets? Depends what you mean When I think of free markets I think in the way that Adam Smith and other classical economists thought - of markets free from monopoly power, business fraud, political insider trading and privileges for vested interests. Their main concern was to free industry and production of goods and services from the trammels of feudalism, from extractive rentier claims and institutional power that went back to military conquest. Their project was to institute markets were there was no 'excess of market price over socially necessary cost value'. Smith once said that businessmen rarely get together except to fix markets to their advantage. He was a completely different breed from some of those who use his name today.

This idea of market freedom is quite different from today's neoliberalism, where 'free' markets promote the interests of the predatory groups from which Smith et al set out to free the economy and society. At one extreme you had free markets imposed at gunpoint in Latin American in the '70s and '80s, where predatory finance and insider privatisation were set 'free' to plunder. And which country's financiers were behind that? Less dramatic, but no less predatory are the markets freed from the kind of regulation set up by governments to counter the privileges and abuses to which I've just referred, where watchdogs, if they exist, are asleep in their kennels. Hence OTC derivatives, CDOs with no market price or pricing mechanism beyond the say-so of private, corrupt rating agencies, distributed by the billion across big banks and their unregulated shadow banking system. This unregulated circus is what brought down the system - in a normal over-lending crisis the location and scale of the problems are identifiable, but not in this one.

In the past there have been great tensions between Wall St and the legislative and executive branches of government but since the '80s there have been closer and closer ties, hinting at an integrated project to free finance from regulation. But while 'free markets' have been the rallying call there has been a conscious cartel (details in Philip Augur's 'The Greed Merchants').

Friday, November 6, 2009 10:03PM Report Comment
 

10. devo said...

Our entire economic market system is based on trying to guess what a handful of individuals, acting in God knows who's interest, may or may not do, for reasons no one can discern.

P Rankmug

Friday, November 6, 2009 10:23PM Report Comment
 

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