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John B. Lounsbury Ph.D., CFP is a financial planner and investment advisor in Clayton, NC.
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  • John S. Reed: My Bad 4 comments
    Nov 8, 2009 11:59 PM | about stocks: TRV, C
    John S. Reed, who was CEO of Citicorp for 14 years before the 1998 merger with Travelers (TRV) and then co-CEO of Citigroup (C) with Sandy Weill until Reed's retirement in 2000, says he was wrong.  A Bloomberg (here) article by Bob Ivry quotes Reed.

    Lawmakers were wrong to repeal the Depression-era Glass- Steagall Act in 1999, Reed said. At the time, he supported overturn of the law, which required the separation of institutions that engaged in traditional customer banking services from those involved in capital markets.

    “We learn from our mistakes,” said Reed, who wrote an Oct. 21 letter to the editor of the New York Times endorsing a division of banking activities. “When you’re running a company, you do what you think is right for the stockholders. Right now I’m looking at this as a citizen.” 

    Reed has the same opinion that a number of others, including SA contributor Simon Johnson and this writer, have expressed repeatedly.

    Congress’ overhaul of U.S. financial regulations should include ordering banks to hold more capital, ensuring executives’ compensation is aligned with long-term profitability and banning firms that take deposits from also engaging in equities and fixed-income trading, Reed said.

    “I would compartmentalize the industry for the same reason you compartmentalize ships,” Reed said in the interview in his office on Park Avenue in New York. “If you have a leak, the leak doesn’t spread and sink the whole vessel. So generally speaking you’d have consumer banking separate from trading bonds and equity.” 

    Reed made a pile of money before he retired (documented in the Bloomberg article), and I expect he has a handsome retirement package.  But he definitely has second thoughts about what he did to make that money.  He may be criticized for what he did, but wouldn't it be nice if others who have created the financial monster would also at least apologize?  Instead, most are in a state of denial.  And a few are speaking from church pulpits to proclaim the righteousness of their mission in the eyes of God  (Discussed here).

    What a spectrum of spectacle.  If the meek shall inherit the earth it may be after the strong have plundered it.  Or maybe not.  Free enterprise may yet be reestablished in spite of the fact that we are not moving that way yet.  It will take years to restructure to a financial system that has checks and balances resulting from competitive forces, where bad decisions can result in failure and wealth is accumulated through sustained economic contributions rather than quarterly and annual gambling with loaded dice.  It will take years because we can not afford the shock of collapsing everything and starting over.  We don't have enough people who know how to grow their own food, spin their own yarn, make their own clothes and scavenge for heating materials.  Such activity would make for very fit survivors, but that would not be the best way to solve our national obesity problem.

    Hat tip to Barry Ritholtz at The Big Picture (here). 

    Themes: Travelers, Citicorp, Citigroup, John S. Reed Stocks: TRV, C
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This post has 4 comments:

  •  
    "We learn from our mistakes'. Well we haven't learned yet. Has Glass-Steagall been re-instituted?

    As a society, if you always put money as the first value of life, you will ALWAYS have a corrupt society. As an individual, if you always put money first, you will ALWAYS have a corrupt soul.
    Nov 09 01:11 AM | Link | Reply
  •  
    Mr. Reed has awakened from what seemed a great party with fabulous benefits. The party is over now and his conscience is getting the better of him. He's going through those few moments that many have shared after what seemed to be a great night out on the town and is waking up in similar fashion to the gentleman (loose usage of the term) in the following short video.

    www.youtube.com/watch?...
    Nov 09 01:39 AM | Link | Reply
  •  
    Excellent video. Very funny. I wonder in Mr. Reed woke up with a corpse attached? A great party at high tide. Many party crimes exposed at low tide.


    On Nov 09 01:39 AM Mark Bern wrote:

    > Mr. Reed has awakened from what seemed a great party with fabulous
    > benefits. The party is over now and his conscience is getting the
    > better of him. He's going through those few moments that many have
    > shared after what seemed to be a great night out on the town and
    > is waking up in similar fashion to the gentleman (loose usage of
    > the term) in the following short video.
    >
    > www.youtube.com/watch?...
    Nov 09 02:48 AM | Link | Reply
  •  
    It is refreshing to hear one of Wall Street's best and brightest admit that they "got it wrong." However, sir, the millions you were paid while you were "getting it wrong" are still sitting in your bank account while the employees who followed you over the cliff and great many ordinary workers across America are now unemployed as well. If you were truly regretful about your actions and lack of judgment you would be using those millions to find jobs for your former employees who put their faith in you.

    Saying you are sorry is easy. What are you doing to undo the harm you have caused?
    Nov 09 10:10 AM | Link | Reply
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