Older and Wiser
John Reed, the former co-chairman and co-chief executive of Citigroup Inc., had a Nixon-to-China moment last week when he appeared before the Senate Banking Committee.
As lawmakers wrestle with how to prevent companies from becoming "too big to fail," Reed — the man who presided over Citi's controversial decision to make itself into a financial services behemoth by merging with Travelers — said that combining banking, securities and insurance turned out to be a bad move.
"There's no question that when we put Travelers and Citi together we created a monster," Reed said. "Most of the difficulties we've had have stemmed from the Salomon Brothers side. Salomon had just been recently acquired by Travelers."
Having lived through the merger, he said, he believes "the system would be stronger if we could provide for some separation where major depositories are not major actors in the capital markets."
"I believe that it is very difficult to manage these cultures," he said. "It's not impossible, but it's very difficult. They're hard to contain. They have a big impact on the risk-taking sort of attitudes at the top of the company and the nature of the people who are working in the company."
Reed supported the proposal by former Federal Reserve Board chairman Paul Volcker to rebuild the legal wall between banking and securities. "I have learned from my experience," he said. "My conclusion is, the system would be better … if we allowed for the type of separation that Mr. Volcker is talking about."
Reed acknowledged that this would not necessarily make him popular with Citi's shareholders.
"I'm suggesting that it would be healthier for the system," he said. "It may not be healthier for Citi's stockholders. But I'm retired. I'm free to speak as an individual citizen."
Sen. Bob Corker, R-Tenn., could not let the remark pass without noting a certain similarity to the situation of Senate Banking Committee Chairman Chris Dodd, who announced he would not run for reelection this year.
"Kind of like a senator who's not running again," Corker said.
Warm and Hot
Though they represent the same industry, two credit union trade groups had vastly different reactions to President Obama's plan to give Troubled Asset Relief Program money to community banks to spur small-business lending.
The National Association of Federal Credit Unions played it cool, politely sending a letter to the president asking him to include credit unions in the plan.
"While we appreciate the president's efforts to reinvigorate small-business lending, we are extremely disappointed that the administration continues to fail to recognize credit unions as part of the solution," NAFCU President Fred Becker said in a statement.
By contrast, the Credit Union National Association went for the jugular, saying it was "outraged and baffled" that the administration's plan did not help credit unions engage in more business lending.
"Credit unions can inject more than $10 billion into the economy," CUNA Chief Executive Dan Mica said in a statement. "But the administration overlooked — or snubbed — the opportunity."
Guru Moves On
John Byrne, the former anti-money-laundering guru at Bank of America Corp. and the American Bankers Association, started a new job last week: executive vice president of the Association of Certified Anti-Money Laundering Specialists.
In an interview Friday, Byrne said he hopes to push the organization into more advocacy work. The association has 10,000 members and is dedicated to training, educating and certifying anti-money-laundering professionals. "I want to help advocate for AML professionals," he said. "It's not a question of 'regulation is burdensome' — it's a question of what is the practical impact on a group that is there to protect institutions."
Though his work had previously entailed advocating banking industry positions, he said the association is also hoping to help government agencies that focus on the same issue. "We also want to be an advocate for those in the agencies whose job it is to oversee money-laundering issues so they can have access to better data and more information sharing," he said.
Byrne was B of A's global regulatory relations executive from 2005 until last year, when he left to form his own consulting company. Previously, he was a long-time expert on AML issues for the ABA.
Promontory Financial Group is adding another heavyweight former regulator to its consulting team. The firm planned to announce today the hiring of Laura S. Unger, a commissioner of the Securities and Exchange Commission from late 1997 to early 2002, as a special adviser. Unger was the SEC's acting chairman from February to August 2001. Before joining the agency, she had been an attorney in the SEC's enforcement division and a counsel to the Senate Banking Committee.
Since leaving the SEC, Unger has done on-air commentary on financial services issues for CNBC and been a consultant to JPMorgan Chase & Co.
In her new role at Promontory, Unger is to advise clients on issues including SEC-related matters, the effects of new legislation and corporate governance.
Tim Geithner, Larry Summers and Ben Bernanke take their lumps every day. Sometimes several times a day. But from Eliot Spitzer? The disgraced former New York governor pulled no punches last week on Comedy Central's "The Colbert Report."
The team of Geithner and Summers, the Treasury secretary and chief White House economic adviser, respectively, "has been in my view an abject failure," Spitzer said. "The White House … had not even begun to do what is critically necessary to restructure our financial services sector."
Spitzer, a Democrat, appeared incensed at how the administration has handled the financial crisis.
"We are rebuilding the system exactly as it was before," he said. "The same banks — the major investment banks — having taken tens, hundreds of billions of dollars of your money and taxpayer money, are now doing exactly what they were doing with it before: gambling with it, taking it out as bonuses and not doing what they should be doing."
Stephen Colbert, the show's host, ended the interview with a reference to Bernanke, asking whether Spitzer sees the Fed chief's reappointment as a positive sign for his own career prospects.
"Ben Bernanke, who oversaw the collapse of not only the United States but pretty much the entire world financial system, and brought our economy to its knees," Colbert said, "has been reappointed as head of the Fed. Does this give you hope of being reelected governor of New York?"
Spitzer's response: "I just became a big fan of Ben Bernanke."