Jin Lee/Bloomberg NewsSallie L. Krawcheck, a former executive with Bank of America, addressed the Bloomberg Markets 50 Summit in Manhattan on Thursday.It’s still the talk of Wall Street: Are big banks too complex? And if so, what should be done?
On Thursday, one former Wall Street executive put the issue in vivid terms as she raised concerns about the complexity of financial behemoths.
“It makes you weep blood out of your eyes,” said Sallie L. Krawcheck, who ran Bank of America’s wealth management division before a management reshuffling last year.
“If you look at the job of the board, if you look at the job of investors, it’s the concern about complexity,” she said, speaking from the stage at the Bloomberg Markets 50 Summit in Manhattan.
The debate about big banks received renewed attention this summer when Sanford I. Weill, the deal maker who built the modern Citigroup, said on CNBC that huge financial institutions should be split up.
Jin Lee/Bloomberg NewsRuth Porat, chief financial officer at Morgan Stanley, speaks at the Bloomberg Markets 50 Summit in Manhattan on Thursday.On Thursday, Ms. Krawcheck did not endorse any one strategy to resolve banks’ complexity, but she said the proposal to break up banks and the regulation known as the Volcker Rule were two possible “means to an end.” Altering executive compensation, she said, might also help.
Ms. Krawcheck said the comments of Mr. Weill, who once worked to repeal the Glass-Steagall law, which had separated commercial banks from investment banks, were not far from her mind.
“When my old friend Sandy Weill said Glass-Steagall should be reinstated, I was on vacation,” said Ms. Krawcheck, who has emerged this year as a critic of the financial industry and regulation. “I think my iPhone exploded with phone calls and messages. I think it’s a great and fascinating debate.”
Several prominent executives have weighed in on the issue recently, with Jamie Dimon, the head of JPMorgan Chase, saying on Tuesday that “there are huge benefits to size.”
Ruth Porat, Morgan Stanley’s chief financial officer, spoke at the Bloomberg Markets conference on Thursday, arguing that the banking industry was in the process of becoming less complex and more transparent. New rules for derivatives, she said, were one source of that change.
“You’ll see more simplification,” Ms. Porat said. But she added, “I don’t expect you’ll see a real breakup of the banks.”
Ms. Porat was asked whether she saw evidence that banks had become too complex.
“It’s tough to generalize,” she said. “My concern is when the products themselves become too complex to understand, one begins to have a problem.”