I’ve already mentioned Bill Moyers’ recent interview with John Reed. If you haven’t watched it yet I highly recommend it. (Although at times I do wish that Moyers would be a bit more hard-hitting.)
Reed was the CEO of Citibank until it was purchased by Sandy Weill’s Travelers Group, which created the Too Biggest to Fail of them all — Citigroup. But this merger was actually not allowed at all by the Glass-Steagall act in force at the time. From the interview transcript:
BILL MOYERS: Because if in that two-year period as I understand it, Glass-Steagall had not been changed, this merger — which had already taken place — would have been illegal.
JOHN REED: We would have to take it apart. And we took steps to make sure that was possible.
BILL MOYERS: But you got the blessing in this two-year period of President Clinton, of the Fed, of–
JOHN REED: We had that blessing prior to. In other words—
BILL MOYERS: What? They assured you that this—
JOHN REED: Yes.
BILL MOYERS: Glass-Steagall would be–
JOHN REED: Yes. In other words, I went with Sandy to call on Chairman Greenspan. We told him we were contemplating this merger. But that it would require that the Fed would be prepared to grant us permission. And we were assured that they would.
And that’s exactly what happened: a foregone conclusion, before anyone who might have a rational objection had even a chance to comment. Reed and Weill were able to convince Greenspan, Bob Rubin, Phil Gramm, President Clinton and anyone that mattered that this would be a Good Thing. We would build a national champion! We could compete with the Europeans! We would maintain the U.S.’ leadership position! Savings would be shared with customers! And banks would be safer because of the diversification of business lines!
Well of course we now know how that story ended.
Lately the European regulators in Brussels have been hearing similar arguments from those promoting a merger between Deutsche Börse and NYSE Euronext to create the largest equity and derivatives exchange in the world. Cue the charm offensive, and the talk of creating a continental champion, a competitor to dominant New York and more savings for the end consumer.
But all for naught, as in the end the EU’s competition commissioner swatted the plan away like some kind of supervisory version of LeBron James. And while it’s quite likely that the ruling will be appealed, you’ve just got to love how the competition commissioner, Joaquín Almunia, refused to play ball or to be swayed by the kind of lobbying that we’ve just accepted as part of the status quo here in the States:
They tried a public relations campaign, lobbying, political pressure to get a positive decision. I told them from the beginning: ‘you don’t know how to deal with the Commission’. This is not the best way to convince us — quite the opposite — it is the wrong way. (Source: Financial Times)
Somebody please give this guy a greencard and a one-way ticket to Washington!
- Related story: We don’t need no education
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Image credit: misslicorice on Flickr