It’s pretty powerful: The former chairman of Citigroup begins his letter to the editor of the New York Times by pointing out that he “has experienced both the pre- and post-Glass-Steagall world.” Then he comes out in favor of breaking up big, complex banks.
As Citi, with its muddled structure of uncooperative fiefdoms, is one of the prime examples of a bank that former Federal Reserve Chairman Paul Volcker and Bank of England Governor Mervyn King would probably want to dismember, John Reed’s support for their idea is even more important.
“Some kind of separation between institutions that deal primarily in the capital markets and those involved in more traditional deposit-taking and working-capital finance makes sense,” he writes, adding that higher capital requirements are still in order.
The short yet pointed letter is also an example of a banker humble enough to admit that the current system isn’t working. Other, still active leaders in the sector might be wise to follow Reed’s lead.