In extraordinary news, one of those who help create our megabanks, Sandy Weill of Citigroup, now says they should be split into investment bank and banking units. Sandy Weill created Citigroup as we know it today. As their CEO he lobbied hard in 1998 for the repeal of the Glass-Steagall Act which mandated that deposit banks be separate from investment banks. But he has now come full circle and is, in effect, calling for Glass-Steagall to be re-instituted.
They say it only applies in Texas but, oopsie, the announcement went out on all their statements nationwide.
A recent SEC proclamation does the same for money market accounts.
Restricting demand deposits in a way that makes it unclear when people will have access to their funds – especially since they need daily access to their checking account or money fund – makes them more likely to withdraw funds before everyone else does. Where would you rather have your funds: at an institution with withdrawal restrictions or at one without limitations on access to your funds? In essence, the Citi and SEC proclamations make the affected institutions more vulnerable, not less.
The SEC says this is being done to protect consumers against bank runs. I say it’s more likely to increase the possibility of them happening.
I’d say banks and the government are getting twitchy about the stability of the system.
The Internal Revenue Service on Friday issued an exception to longstanding tax rules for the benefit of Citigroup and the few other companies partially owned by the government. As a result, Citigroup will be allowed to retain $38 billion in tax breaks that otherwise would decline in value when the government sells its stake to private investors.
While the Obama administration has said taxpayers likely will profit from the sale of the Citigroup shares, accounting experts said the lost tax revenue could easily outstrip those profits.
Whatever the banksters want, Obama gives them. Even if they have to ignore accounting standards and basic ethical behavior. Oh, did I say “ethical”? How quaint of me. Certainly the gangsters in DC and on Wall Street have shown they have no need for outmoded concepts like that as they steal billions from the rest of us.
Mish details how the greedhead move by Citi (and other credit card companies, see the comments to the post) in raising credit card interest rates for many to 29.99% for no reason may be due to their deteriorating financial positions rather than their usual avarice and contempt for customers.