A Banker Who Eats What he Kills does more for the Public Good than a Fat Cat on Top of a Pile of Assets

A Personal Touch Lets Wall Street Boutique Banks Run With the Big Dogs is a headline that brings up a previously suggested law to split financial institutions into Not Too Big To Fail companies.   As explained before these splits could be inexpensively done by distributing shares of the different new entities to the shareholders of the original big company, very much in the same manner that the Bell Telephone company was split off into the various “Baby Bells”. Afterward consolidations up to one percent would be  allowed but the rule would further require that those who grow to 1.5% of assets to GDP would have to split again.  Such a rule would have many beneficial effects.

First and foremost is the benefit to the economy where diverse interests are fully served for the betterment of the public good.  For example, Sandy Weill’s vision of a one stop combined banking, investments and insurance company when forming Citigroup, and in the process eliminating the Depression era Glass Steagall act, was fatally flawed because it traded result for convenience.  The desultory perferomance came from what the boutique firm Evercore Partners founder Roger C Altman observed “at a big bank what you do or your group does, doesn’t move the needle” yet “people want to have impact.”  Without transparent result available big bank management sides towards the assets under management metric which is not a customer related measure.  Instead its the bank minions going out and convincing customers to save and invest in funds conveniently run by the bank and build a big books of assets to determine a manager’s bonus without ever asking, to paraphrase an old investment book title. “where are the customer’s bonuses?”