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Weill's Bombshell: "I am suggesting that [large, diversified financial companies] be broken up so that the taxpayer will never be at risk, the depositors won't be at risk." That is what Sandy Weill, the man who assembled the quintessential Frankenbank, said on CNBC Wednesday morning, causing finance and media professionals around the world to gasp, spit out their coffee, and/or utter things like "whoa" or "holy mackerel" or other, unprintable expressions. And yes, Weill really did follow up with the classic craven passive-verb construction "Mistakes were made." It's tempting to dwell on the many inevitable snarky reactions ("Well done Sandy — 'C' trades at 10 cents on your 1998 merger dollar," PIMCO's Bill Gross tweeted). But let's stick to the important matter: What's the likely fallout from the consummate empire-builder's coming-to-Glass-Steagall moment? According to the Journal's "Heard on the Street" column, it's unlikely to spark legislative changes anytime soon, but it could well embolden shareholders of the megabanks — who've suffered as the equity market has discounted the stocks relative to smaller institutions — to press for change. Wall Street Journal, Financial Times, New York Times, Marketplace, FT Alphaville, Dealbreaker, Naked Capitalism

Geithner on the Griddle: Lawmakers grilled the Treasury secretary on what he knew about Libor manipulations when he was the president of the New York Fed in 2008. Financial Times, New York Times

Wall Street Journal

To commemorate the second anniversary of the passage of Dodd-Frank, Rep. Jeb Hensarling, the Texas Republican, reiterates the GOP’s major complaints about the law in an op-ed. The legislation hasn’t fulfilled the president’s promise that it would lift the economy (a fate-tempting claim, in retrospect); and rather than precluding future bailouts, Hensarling writes, “‘too big to fail’ is actually enshrined into law, and Dodd-Frank's voluminous rules are proving to be some of the most confusing, complex and harmful our capital markets have ever seen.”

Financial Times

The challenge for regulators like the Fed is that they have to be both cops and firefighters, and these two jobs can conflict, writes columnist John Gapper. In times of crisis, “their immediate priority is to put out the fire, not to catch and punish the arsonists. … One doesn’t have to believe … that the relationship between the Fed, the Treasury — and central banks and regulators elsewhere — and the financial industry is inherently corrupt to identify a problem. Any oversight that is biased towards preserving stability will often shy from making life too difficult for banks.”

New York Times

Citi and Morgan Stanley are arguing over the valuation of their joint venture, Smith Barney, so they’ve called in a referee, the investment bank Perella Weinberg, to appraise the brokerage. Morgan Stanley, which owns 51% of Smith Barney, is in talks to buy another 14% from Citi, but the price is a sticking point.


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