'I'm sorry' Citigroup was ever born, co-founder says
John Reed, the co-founder of Citigroup, now wants to apologize for creating that monster -- which has become one of the biggest taxpayer-supported casualties of the financial-system crash.
In an interview with Bloomberg News, the 70-year-old Reed says he’s "sorry" for his role in forming Citi in 1998, when Reed’s Citicorp merged with Sanford Weill’s brokerage and insurance titan Travelers Group.
Reed, who has been publicly expressing regret about the merger since at least April 2008 (when he told the Financial Times that the deal was a "mistake"), also has joined former Federal Reserve Chairman Paul Volcker in calling for the restoration of the Glass-Steagall Act, which until its repeal in 1999 had restricted commercial banks’ forays into high-risk Wall Street businesses.
"I would compartmentalize the [banking] industry for the same reason you compartmentalize ships," Reed 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."
Lawmakers were wrong to repeal the Depression-era Glass-Steagall Act in 1999, Reed said. At the time he supported the overturn of the law, which required the separation of institutions that engaged in traditional customer banking services from those involved in capital markets.
"We learn from our mistakes," said Reed. "When you’re running a company, you do what you think is right for the stockholders. Right now I’m looking at this as a citizen."
-- Tom Petruno