Tuesday, 31 July 2012

Former Citi Boss: Reduce Leverage to 15 Times Assets, Put EVERYTHING Back on the Books, and Mark All Assets to Market EVERY DAY

It is – justifiably – big news that former Citi CEO Sandy Weill said that we should break up the big banks, and separate traditional depository banking from speculative investing. Indeed, even congress members are confronting top government officials on why they haven’t done this.

But Weill said 3 other equally important things today.

First, Weill told CNBC that the financial crisis was largely caused by too much leverage, and that we should reduce leverage to between 12-15 times. (Background.)

Secondly, Weill said that we have to restore transparency, so that nothing is hidden off balance sheet. (Leading economist Anna Schwartz told the Wall Street journal in 2008: “The Fed … has gone about as if the problem is a shortage of liquidity. That is not the basic problem. The basic problem for the markets is that [uncertainty] that the balance sheets of financial firms are credible.”)

Third, Weill argued that all assets must be marked to market every day
.
http://www.washingtonsblog.com/2012/07/former-citi-boss-reduce-leverage-to-15-times-assets-put-everything-back-on-the-books-and-mark-to-market-every-day.html

Plus put back Glass Steagall, prosecute for fraud, and VOID most of the Derivatives Casino Gambling Market (although making total leverage 12-15 times assets should cover this problem).

[Posted at the SpookyWeather blog, July 31st, 2012.]


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