Reviving Glass-Steagall
Breaking Up Is Hard to Do
By JASON ZWEIG, WSJ
Bank stocks have been stinking up the market for years. Would breaking up the companies help unlock some value for investors?
This week, Sanford Weill, the mogul who built Citigroup C +3.88% into a giant institution, urged splitting apart the very banking behemoths he helped construct. That revived the debate over reinstating the Glass-Steagall Act, the 1933 law that effectively barred commercial banks from underwriting stocks and bonds.
At first glance, reviving Glass-Steagall might seem like a panacea to investors. One simple way to judge the priciness of bank stocks is to see where they are selling relative to their tangible book value per share—essentially, what they own minus what they owe. Citigroup and Bank of America, BAC +1.95% for example, are both selling at just over half their tangible book value, a statistical bargain if ever there was one; the KBW Bank Index of two dozen big institutions trades around 0.8 times book value.
But as recent disclosures about multibillion-dollar trading losses at J.P. Morgan Chase JPM +3.02% showed, today's giant banks are so convoluted that insiders themselves can be mistaken about what their complex assets are worth. It isn't realistic for outsiders to think they can do better.
(More here.)
By JASON ZWEIG, WSJ
Bank stocks have been stinking up the market for years. Would breaking up the companies help unlock some value for investors?
This week, Sanford Weill, the mogul who built Citigroup C +3.88% into a giant institution, urged splitting apart the very banking behemoths he helped construct. That revived the debate over reinstating the Glass-Steagall Act, the 1933 law that effectively barred commercial banks from underwriting stocks and bonds.
At first glance, reviving Glass-Steagall might seem like a panacea to investors. One simple way to judge the priciness of bank stocks is to see where they are selling relative to their tangible book value per share—essentially, what they own minus what they owe. Citigroup and Bank of America, BAC +1.95% for example, are both selling at just over half their tangible book value, a statistical bargain if ever there was one; the KBW Bank Index of two dozen big institutions trades around 0.8 times book value.
But as recent disclosures about multibillion-dollar trading losses at J.P. Morgan Chase JPM +3.02% showed, today's giant banks are so convoluted that insiders themselves can be mistaken about what their complex assets are worth. It isn't realistic for outsiders to think they can do better.
(More here.)
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1 Comments:
Let's go back in history for a minute and ask 'who was responsble for repealing Glass-Steagal'. Answer - Sandy Weill, Robert Rubin, and Bill Clinton. Democrats all.
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