“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’s “Squawk Box.”
He added: “If they want to hedge what they’re doing with their investments, let them do it in a way that’s going to be mark-to-market so they’re never going to be hit.”
It might be a good idea to require large banks to spinoff their investment banking arms so that one side doesn't hurt the other when there is a crisis. So you have to solid, staid bank with its deposits and loans that pays a generous dividend. Then you have the go-go high risk, high reward of the investment bank that underwrites debt and trades commodities and such.
I think this would unlock quite a bit of value and go a long way to creating confidence that my money won't be used to bail out a bunch of huge banks. Right now I would only invest in regional banks because you can see they take in deposits and loan out the money for a certain rate of return. They pay a decent dividend and you won't have to worry about a Spanish bankruptcy damaging their balance sheet or even cause them to fail if you are long them. You can also read their 10Q without getting a headache or wondering what sort of assets aren't included in these figures.
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