NYT, WSJ - Anyone is free to change his or her mind, but for one of the WORLD'S foremost financiers, who was in favor of dumping the venerable Glass-Steagall Act, it was big news when he changed his mind on July 26, 2012 and announced to the trade he now believes the 1933 Glass-Steagall Act (struck down in 1999 by the adoption of the Gramm-Leach-Bliley Act) should be modified somewhat but reinstated by prohibiting a bank to be both an investment bank and a commercial under very specific rules. The Glass-Steagall Act in effect did just that- kept a Bank from being both a commercial and investment bank, denying an investment bank the right to use customer money (like CD's for instance) to gamble in financial markets.
The financial fiasco of 2007-2012 was fueled by the lack of controls as to whose money a bank could use for investments. Big Banks grew larger, balance sheets loaded up with risky paper like toxic assets and weird derivatives, loose mortgages and over-zealous investments with rewards handed out to executives and "hot" sales personnel for returns based upon faulty paper profits, watered-down intrinsic values of the very foundations under the financial institutions for whom they labored. Mr. Sanford Weill can take his share of the blame but it requires nerves of steel to step forward and announce to all he was wrong and The Glass-Steagall Act should be brought back albeit in a somewhat different form. Way to go, Sandy.
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