Break It Up!

Aug. 2, 2012
Too big to fail is a bad idea.

You may not know his name, but Sandy Weill is the man who started today’s megabank trend when back in 1998 he merged Citigroup and Travelers Group.  The importance there is that it created the world’s largest bank and required Congress to repeal the Glass-Steagall Act.  Mr. Weill now says that America’s biggest banks should be broken up.  He is right -- the repeal of Glass-Steagall was an expensive mistake.

The Glass-Steagall Act prevented banks from taking deposits from customers while simultaneously using that money to gamble in the markets.  Federally insured deposits, where taxpayers assume the insurance risk, could then be used by banks to enhance their profits while sharing the risk with John Q. Taxpayer.  The results became evident in 2008 and again in 2012 with JP Morgan’s $6 billion trading losses.

The Dodd-Frank Act seeks to remedy this to some degree with the Volker Rule.  Banks and Wall St. firms are vehemently opposed to the Rule, as it will curtail their profitability.  Tough.  They should risk their own money and not the deposits they have been entrusted with and certainly not taxpayer-insured funds.  Their profits would take a hit, but "too big to fail" would pass away from the banking lexicon. 

About the Author

Alan Beaulieu Blog | President

One of the country’s most informed economists, Alan Beaulieu is a principal of the ITR Economics where he serves as President. ITR predicts future economic trends with 94.7% accuracy rate and 60 years of correct calls. In his keynotes, Alan delivers clear, comprehensive action plans and tools for capitalizing on business cycle fluctuations and outperforming your competition--whether the economy is moving up, down, or in a recession.

Since 1990, he has been consulting with companies throughout the US, Europe, and Asia on how to forecast, plan, and increase their profits based on business cycle trend analysis. Alan is also the Senior Economic Advisor to NAW, Contributing Editor for INDUSTRYWEEK, and the Chief Economist for HARDI.

Alan is co-author, along with his brother Brian, of the book MAKE YOUR MOVE, and has written numerous articles on economic analysis. He makes up to 150 appearances each year, and his keynotes and seminars have helped thousands of business owners and executives capitalize on emerging trends. 

Prior to joining ITR Economics, Alan was a principal in a steel fabrication company and also in a software development company.

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