No! More like stupid than naive. (see 1 and 1a below.)
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Sandy Weill was, and remains a pompous ass.
Glass Steagall, served the nation well and never should have been overthrown but more importantly, the problem with bank conglomerates is not their structure but their self-delusional management.
Once bankers believed they could leave their geographic area and be hot shots in other regions and businesses they made themselves sitting ducks to be picked off as the yahoos from out of town etc.. Same for many realty developers.
Second, bankers led themselves to mistakenly believe they were growth companies. Thus they set about making loans that were obviously bad bets and acquiring business that created culture clashes. They became driven by the sight of dancing plums encouraged by Wall Street Investment Bankers trolling for huge M &; A fees and lost sight of how conservative sound banking and bankers really should, and once did, operate.
When I was a young kid, I injured my knee and Walter Willett, a Scottish banker from New England, who had moved to Birmingham to open a bank, had my same blood type. I needed a transfusion. Walter was a client of my father and jumped at the chance to help. My father told Walter after the transfusion I became a stingy tight wad.
Walter's bank was totally solvent when Roosevelt declared The Bank Holiday. Walter was so infuriated ,he threw a party every year to celebrate the anniversary of FDR's death until his own years later.(See 2 below.)
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This was sent to me by a dear friend and fellow memo reader. I believe I know one of the founders:
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Dick
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1)
Miller: More turbulence ahead
Aaron David Miller, former State Department Mideast advisor and peace process veteran, warns that U.S.-Israel relations are in for a rough ride if Pres. Obama wins a second term:
Obama's Convictions
I've watched a few presidents come and go on this issue, and Obama really is different. Unlike Clinton and George W. Bush, Obama isn't in love with the idea of Israel. As a result, he has a harder time making allowances for Israeli behavior he doesn't like. Obama relates to the Jewish state not on a values continuum but through a national security and interest filter.
It's true that the president doesn't emote on many policy issues, with the possible exception of health care. But on Israel, he just doesn't buy the "tiny state living on the knife's edge with the dark past" argument -- or at least it doesn't come through in emotionally resonant terms. As the Washington Post's Scott Wilson reported, Obama doesn't believe the "no daylight" argument -- that is, to get Israel to move, you need to make the Israelis feel that America will stand by it no matter what. Quite the opposite: Obama appears to believe that Israel needs to understand that if it doesn't move, the United States will be hard pressed to continue to give it complete support.
In this respect, when it comes to Israel, Obama is more like Jimmy Carter minus the biblical interest or attachment, or like Bush 41 minus a strategy. My sense is that, if he could get away with it, the president would like to see a U.S.-Israeli relationship that is not just less exclusive, but somewhat less special as well.
Right-wing Israeli leaders have found ways to cooperate quite closely with American presidents in the past. But this time around, it's not so easy. No Common Project
There are just no good answers to the region's problems. The peace process is stuck, and Iran's quest for a nuclear weapon seems impervious to sanctions or diplomacy. The Arab world is going through changes that will introduce even more uncertainty into Israeli calculations and make risk-taking on the peace process less likely. And as the president might say, let's be clear: Netanyahu is not going to offer the Palestinians a deal on Jerusalem, borders, or refugees that they will accept. Indeed, on the issue of a peace settlement, Obama's views are much closer to the Palestinians than to Israel.
Bibi's Suspicions
This is hardly first time the U.S.-Israeli relationship has suffered from the clash between a right-wing prime minister and an American president. But unlike past occasions, when the right-wing prime minister was confident and secure -- Begin, Shamir, Ariel Sharon -- this time Israel has a leader who feels both insecure and surrounded.
The Likud's previous leaders were genuine and authoritative right-wingers. It's not that they trusted the Americans, though Begin did invest heavily in Washington. They trusted their own instincts and had the power and will to make decisions. Moshe Arens, Shamir's foreign minister, told the prime minister before his visit to Washington in 1989 that the Americans would cut his balls off. No doubt Shamir believed him. But the prime minister was still strong enough to cooperate with the Americans when they asked him in 1991 not to retaliate for Iraqi SCUD attacks, or when Baker pressed him to go to the Madrid peace conference.
Netanyahu is different. He's constantly looking over his shoulder, worried about his coalition and the loyalty of the right. And Bibi trusts no one: He's an ambivalent leader pulled by party, tribe, and family on one hand, and by the need to be loved and successful on the other. His policies, particularly on settlements and peacemaking, seem half-hearted and tentative. One day, he institutes a 10-month settlement freeze; the next day, he orders a building spree. One day, he endorses the principle of a Palestinian state; the next, he opposes the kinds of decisions required to make it a reality. He formed a national unity government to deal with the military conscription debate, then saw it collapse after he wasn't able to reach a compromise on the issue. No wonder the Israeli right, left, center, to say nothing of the Americans, don't really trust him.
The Iranian nuclear issue could still push the two countries closer together, even though they differ on the urgency of the threat and how to deal with it. If Israel should strike and the Iranians hit back, America will be most likely drawn in and engaged on Israel's side. Alternatively, if the United States attacks, we could see another Gulf War scenario, where the Americans plead with the Israelis to stay out even if provoked.
There's almost no scenario involving a military strike against Iran -- even if the Israelis struck without American approval -- that wouldn't create a need for intimate cooperation. However it plays out, Israel and the United States could easily find themselves in the same boat, and Obama and Netanyahu would be forced to work together closely as a result.
Short of that, however, the U.S.-Israeli relationship is in for a turbulent period. There will be no transformative moment here for the two main players. If Obama had a wish regarding Israel, it would be that anyone -- Shaul Mofaz, Tzipi Livni, Ehud Olmert -- replace Bibi. And when Bibi blows out the candles on his next birthday, he'll be wishing that Mitt Romney defeats Obama in November.
It's fascinating to consider that in the two most recent cases where American presidents clashed with Israeli prime ministers -- Carter and Bush 41-- both were defeated. Shamir also lost to Rabin in 1992, after clashing with Bush the elder. History could repeat itself in the case of both Obama and Netanyahu -- but what will be more intriguing and entertaining, however, is what happens if they both survive to go another round. Buckle your seat belts. It may be a wild ride.
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1a) Coleman: Romney is more than a fair-weather friend of Israel
In an opinion piece published by the JTA, former U.S. Senator Norm Coleman writes that Romney understands Israel:
At the end of the month, Mitt Romney will visit Jerusalem. It has become a ritual of American politics for presidential candidates to pay a visit to Israel, but this is certainly not Romney's first trip to Israel -- this will mark his fourth visit -- and it won't be his last.
I've known Mitt Romney for a long time, and what I know makes his sincerity and deep commitment to the security of the State of Israel part of his core.
That commitment flows from his understanding of Israel's society and history. Romney is a democrat, with a small "d." Israel is a thriving democracy, living in mortal danger throughout its modern history. Romney is full of admiration not only for Israel's democratic political order, but also for the way Israelis have defended themselves against all odds since Israel's founding as a state in 1948.
By sheer coincidence, Romney is an old and personal friend of Israel's prime minister, Benjamin Netanyahu. Romney's first job after finishing up at Harvard was at the Boston Consulting Group, and Netanyahu was working there at the time and sat in an office down the hall. The two struck up a friendship and have remained close. If Romney were to become president, it would be an extraordinary chapter in U.S.-Israeli relations.
"There is little precedent," The New York Times wrote recently, "for two politicians of their stature to have such a history together that predates their entry into government."
Certainly Israel could use a close friend in the White House these days.
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By Forrest Jones
Calls to split up big banks are growing, even from big-bank architect Sandy Weill, a former Citi chairman, but in reality, any such downsizing will take a long time and there's no need for "draconian" measures to speed up the process, says star Wall Street analyst Meredith Whitney.
Earlier Wednesday, Weill said big banks need to be broken up due to the systemic risk their potential collapses would pose on taxpayers and depositors.
Splitting up big banks may happen, but over time, as the banks must find a way to keep the more profitable areas of their businesses, which in reality, aren't all that big.
"I think it's steadily in the process of being split but you don't have to have a draconian move when you break up the banks. It's very clear where the profitability is coming from and it's very clear that the banks are at the initial stages of getting to where they need to go," Whitney told CNBC, pointing out that profitable banking operations are high-fee, low capital-intensive areas of the business.
"If you look at the cash management, the global transaction services of Citi and JPMorgan, those are great businesses but they happen to be small businesses at most under 15 percent of the total businesses," Whitney said.
"The asset management business is great business, these are both annuity-style businesses, high-fee, low-capital intensive businesses."
Many banks have put all of their eggs into the capital markets side of operations with the aim of generating more resources to originate more products like consumer loans.
"That model is broken but that's where the bulk of the infrastructure is. It's nice to say the big banks should be broken up. It's very expensive to do so, which is why you see the big banks trading at such deep discounts," Whitney added.
Big banks in today's sense were born in the 1990s with the repeal of the Glass-Steagall Act, which separated investment banking and commercial banking for most of the twentieth century.
With the law's repeal, investment banks and commercial banks grew under one roof and in the process, destroyed the pricing structure of the products they sold.
"Pricing on every product, from a mortgage to a home-equity loan to a credit card was eviscerated with the idea that they could make money on the other side through securitizing their products — this aggregate would make more money. And the fact is the aggregate has completely destroyed the pricing model for financial services," Whitney said.
Regional banks can step it up to restore pricing for those financial products, Whitney added.
Weill, who designed so-called supermarket banking, said earlier that too much leverage and not enough transparency these days call for a return for a separation of investment and commercial banking.
“What we should probably do is go and split up investment banking from banking, have banks be deposit takers, have banks make commercial loans and real estate loans, have banks do something that’s not going to risk the taxpayer dollars, that’s not too big to fail,” Weill told CNBC earlier.
Other noted financial industry leaders have pointed out that big banks should be broken up, including Sheila Bair, former head of the Federal Deposit Insurance Corporation.
Big banks haven't created as much value for shareholders than once thought.
"Whatever economies the megabanks achieve from their size are more than offset by the challenges in managing trillion-dollar institutions that are into trading, market making, investment banking, derivatives, and insurance, in addition to the core business of taking deposits and making loans," Sheila Bair, former head of the Federal Deposit Insurance Corporation, wrote in a recent Fortune column.
"This is one of the reasons why, even before the crisis, their shares performed more poorly than those of the well-managed regional banks, and continue to do so."
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3) America's Two Economies
With Barack Obama, the competition between the private economy and the public economy is clear.
By Daniel Henninger
For a long time, the United States had one economy. Now we have two economies that compete for America's wealth: A private economy and a public economy. The 2012 election will decide which will be subordinate to the other. One economy will lead. The other will follow.
How the U.S. arrived at the need to choose between two competing economies reveals a lot about the political polarization in the country. Any history of the Democratic Party in the 20th century will recognize its roots in the American labor movement. The party was defined by the names of those unions. The United Mine Workers. The United Auto Workers. The Brotherhoods of Teamsters and Railroad Workers. Consider what those names represented: Both Democrats and Republicans were rooted in the private economy. Unionized workers knew then that this private economy was where they made their living. The arguments were over dividing the productive fruits of that economy. That was your father's Democratic Party.
From the 1960s onward, the professional Democratic Party began to lose its relationship with the private economy. Democratic politicians drew closer to a rising public-sector union movement and its campaign financing, while the private unions declined. This meant the party itself was slowly disconnecting from the machinery of the private economy and becoming part of a rising parallel economy, the public economy of government.
There was one other big event that convinced Democrats that their public economy was equal to or better than the private economy. It has to do with the Democratic Party's moral identity. After JFK's assassination, Lyndon Johnson passed the building blocks of the Great Society, notably Medicare and Medicaid. But most importantly came the Voting Rights Act of 1965. The legislative events of that period (no matter that they passed with bipartisan votes) convinced the Democratic Party once and for all of government's moral efficacy. Public spending, conclusively, was now a public good.
Columnist Daniel Henninger. Photo: Getty Images
Today the private and public economies are in head-to-head competition for the nation's wealth—with the private economy calling that wealth capital or income, and the public economy calling it tax revenue and making moral claims for spending tax revenue.
Until recently and except for the Reagan years, the Republican Party has largely been a confused onlooker, uncertain how to embrace the private economy. In the 1990s, the party embraced the private sector mainly as a source of contributions via K Street lobbyists. In short, crony capitalism.
With the Obama administration, the tensions between the country's two economies clarified. The $831 billion spending bill in 2009 was intended to stimulate hiring of public-sector workforces but also among the satellite businesses that are subsidiaries of the public economy. Barack Obama's routine use of the traditional private-economy term "investment"—in energy, education and such—is the public economy claiming capital for its needs.
President Obama is telling the private economy it must subordinate itself to the public economy's moral efficacy. The passage in 2010 of the Affordable Care Act, with no Republican support, was justified as a 1960s-type act of moral necessity. The private economy, in his view, can't compete on that basis.
Chad Crowe
In the November 2010 elections, the private economy pushed back. Two years into the financial crisis and amid tea-party insurgencies, Democrats were swept out of office at every level of government.
These are not small events. Powerful belief systems are in motion today, and they are slamming into each other. Rep. Paul Ryan in the first sentence of his now-famous Roadmap budget said, "Rarely before have the alternatives facing America been so starkly defined." President Obama, announcing his ideas on taxes on July 9, said, "What's holding us back . . . is a stalemate in this town, in Washington, between two very different views about which direction we should go in as a country" (emphasis added).
Those are the two poles in an historic battle over who runs the American economy.
For about 40 years before 2008, spending as a percentage of GDP was around 20%. In 2009, it rose to 25% and has remained at 24% of GDP. This isn't just spending data. These numbers are a proxy for the standoff between the public economy and the private economy.
Some in the Democratic Party argue that this higher, "normal" spending level (the White House projects 22+% of GDP going forward) is necessary to fulfill the commitments our politics have made to retiring baby boomers and others. The role of the private economy in the U.S. will be to support the long-term wants and needs in the public economy.
President Obama is right: This is a choice between two paths into the American future, the clearest choice since the end of World War II. It is a mandate election.
Barack Obama is explicitly seeking a mandate to make the public economy pre-eminent. That is the unmistakable meaning of "You didn't build that." His opponent so far is talking about, but not seeking a mandate for, the other economy. One expects that in time Mitt Romney will seek a mandate equal to Mr. Obama's.
3a)Four Little Words
What's the difference between a calm and cool Barack Obama, and a rattled and worried Barack Obama? Four words, it turns out.
Why the Obama campaign is suddenly so worried.
By Kim Strassel
What's the difference between a calm and cool Barack Obama, and a rattled and worried Barack Obama? Four words, it turns out.
"You didn't build that" is swelling to such heights that it has the president somewhere unprecedented: on defense. Mr. Obama has felt compelled—for the first time in this campaign—to cut an ad in which he directly responds to the criticisms of his now-infamous speech, complaining his opponents took his words "out of context."
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Columnist Kim Strassel on Scott Brown's new ad contrasting Elizabeth Warren and President Obama to Presidents Clinton, Reagan, Kennedy, and Johnson. Photo: Getty Images
That ad follows two separate ones from his campaign attempting damage control. His campaign appearances are now about backpedaling and proclaiming his love for small business. And the Democratic National Committee produced its own panicked memo, which vowed to "turn the page" on Mr. Romney's "out of context . . . BS"—thereby acknowledging that Chicago has lost control of the message.
The Obama campaign has elevated poll-testing and focus-grouping to near-clinical heights, and the results drive the president's every action: his policies, his campaign venues, his targeted demographics, his messaging. That Mr. Obama felt required—teeth-gritted—to address the "you didn't build that" meme means his vaunted focus groups are sounding alarms.
The obsession with tested messages is precisely why the president's rare moments of candor—on free enterprise, on those who "cling to their guns and religion," on the need to "spread the wealth around"—are so revealing. They are a look at the real man. It turns out Mr. Obama's dismissive words toward free enterprise closely mirror a speech that liberal Massachusetts Senate candidate Elizabeth Warren gave last August.
Ms. Warren's argument—that government is the real source of all business success—went viral and made a profound impression among the liberal elite, who have been pushing for its wider adoption. Mr. Obama chose to road-test it on the national stage, presumably thinking it would underline his argument for why the wealthy should pay more. It was a big political misstep, and now has the Obama team seriously worried.
Associated Press/Don Petersen
The president at a campaign stop in Roanoke, Va., July 13.
And no wonder. The immediate effect was to suck away the president's momentum. Mr. Obama has little positive to brag about, and his campaign hinges on keeping negative attention on his opponent. For months, the president's team hammered on Mr. Romney's time at Bain, his Massachusetts tenure, his tax returns. "You didn't build that" shifted the focus to the president, and his decision to respond to the criticisms has only legitimized them and guaranteed they continue.
The Obama campaign's bigger problem, both sides are now realizing, is that his words go beyond politics and are more devastating than the Romney complaints that Mr. Obama is too big-government oriented or has mishandled the economy. They raise the far more potent issue of national identity and feed the suspicion that Mr. Obama is actively hostile to American ideals and aspirations. Republicans are doing their own voter surveys, and they note that Mr. Obama's problem is that his words cause an emotional response, and that they disturb voters in nearly every demographic.
It's why Mr. Obama's "out of context" complaints aren't getting traction. The Republican National Committee's response to that gripe was to run an ad that shows a full minute of Mr. Obama's rant at the Roanoke, Va., campaign event on July 13. In addition to "you didn't build that," the president also put down those who think they are "smarter" or "work harder" than others. Witness the first president to demean the bedrock American beliefs in industriousness and exceptionalism. The "context" only makes it worse.
This gets to the other reason the Obama campaign is rattled: "You didn't build that" threatens to undermine its own argument against Mr. Romney. Mr. Obama has been running on class warfare and the notion that Mr. Romney is a wealthy one-percenter out of touch with average Americans. Yet few things better symbolize the average American than a small-business owner. To the extent that Mr. Romney is positioning himself as champion of that little business guy and portraying Mr. Obama as something alien, he could flip the Obama narrative on its head.
It would be all the more potent were Mr. Romney to use "you didn't build that" to launch his own economic narrative. One unexpected side effect of "you didn't build that" is that it has emboldened the GOP to re-embrace and glory in free enterprise (so abused since the financial crash). And the president's disparaging attack on business has also made voters more open to a defense of it.
Meaning, it's a perfect time to marry emotion with some policy. Mr. Romney has explained why the president doesn't get it. The next step is to explain why his own tax policies, regulatory proposals, and entitlement plans are the answer for those who actually do the building. The president is on defense. We'll see if Mr. Romney can keep him there.
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