They were words no one ever expected Sanford I. Weill — the man who helped usher in the age of the financial supermarket — to utter.
“What we should probably do is go and split up investment banking from banking,” Mr. Weill, former Citigroup chief executive, told CNBC’s “Squawk Box” on Wednesday. “Have banks be deposit takers, have banks make commercial loans and real estate loans, have banks do something that’s not going to risk the taxpayer dollars, that’s not going to be too big to fail.”
His words were essentially a call for a return to Glass-Steagall, the financial regulation that for decades separated commercial banking from investment banking in an effort to keep the financial world safer and easier to regulate. And it was an admission rich with irony.
For it was Mr. Weill, the empire builder who progressively turned an insignificant Baltimore-based lender into the towering financial services provider named Travelers and who erased Glass-Steagall with the $70 billion union of his firm with Citicorp in 1998.
And as the world becomes deleveraged, money has been pouring out. In October 2011 alone, hedge funds saw $9 billion go out the door. The London-based Man Group, the largest publicly traded hedge fund in the world, saw its stock dive 25 percent over the course of one day in September, when it shocked the market by announcing that $2.6 billion had been redeemed by clients over a three-month span.
“We used to rely on the public making dumb investing decisions,” one well-known Manhattan hedge-fund manager told me. “but with the advent of the public leaving the market, it’s just hedge funds trading against hedge funds. At the end of the day, it’s a zero-sum game.” Based on these numbers—too many funds with fewer dollars chasing too few trades—many have predicted a hedge-fund shakeout, and it seems to have started. Over 1,000 funds have closed in the past year and a half.
"We shed data all the time, like dead skin cells. With every click, every Facebook friendship, every shopping trip, every interaction with a government agency, we leave a mote."