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A Banker’s Act of Contrition

Posted January 10, 2010 by Matthew Denton

Too late or just in time?

So is this the right time to hear a former bank executive apologize for creating a system that caused the collapse of the real estate lending market and even the entire economy? Apparently, John Reed thinks so. The former Citigroup executive helped then commercial bank Citicorp merge with Traveler’s Group Inc. into what became the largest stock swap in history valued at $85 billion. Reed says in a Bloomberg interview, “I’m sorry. These are people I love and care about. You could imagine emotionally it’s not easy to see what’s happened…I would compartmentalize the industry for the same reason you compartmentalize ships. 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.”

Well this isn’t something that you get to read everyday. But something tells us that it’s not worth hearing at all.

First, Reed has already resigned from Citigroup so he gets to speak what he has in mind, even if it means jeopardizing an already troubled banking institution. It would be better to have this spoken by Vikram Pandit, if you ask us.

Second, the media is speculating a snowball effect after this apology. Well, it won’t be that easy. Ever imagined how Barney Frank or Ken Lewis would look like while admitting how irresponsible they are after all these years? Again, it’ll be a miracle to hear them say these things.

Third, does it change the system even if he announced something that can’t bring back the lost equity of millions of homes in the country? The damage has been done and the economy was at stake. A recovery will only be possible if they think about reviving the 1933 Glass-Steagall Act.

It’s easy for Reed to say but the millions of incentives that he pocketed for foisting his ideas can never be absolved.

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