Sanford “Sandy” Weill is widely credited with taking down Glass-Steagall, the law that separated investment banking from deposit banking for decades in the United States. In fact, he’s so happy with the results that he is reported to have a large wood engraving of his image with the title “The Shatterer of Glass-Steagall.” So it’s a bit surprising that he took to CNBC today to argue, in essence, that the law should be brought back: that investment banks and depository institutions ought to be kept separate, in order to protect taxpayers from providing a backstop.

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In short, his proposition is this (from CNBC): “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.”

The man who arguably invented this system stopped well short of a mea culpa, however. Asked if he thought the divide between investment and depository banking should never have been breached — something he helped engineer with the merger of Travelers Group and Citigroup — Weill said this: “I think the earlier model was right for that time. I think the world changed with the collapse of the real estate market and the housing bubble and what that did because of leverage in certain institutions, so I don’t think it’s right anymore.”

This argument is clever in the way it shifts blame around. Perhaps that leverage would have been impossible with Glass-Steagall in place. Or maybe not. After all Bear Stearns and Lehman Brothers, two of the most over-leveraged institutions in 2008, didn’t have retail banks. Or maybe their insane amounts of leverage became necessary in order to compete with firms like Citigroup, created by Weill himself — we won’t pretend to know. But it’s at least noteworthy that Weill gives himself a pass while otherwise giving the finance industry a well-deserved torching.

Competitive needs

Asked whether investment banks would be unable to compete without the cheap source of funding provided by a retail bank, Weill shrugged the question off: “[Goldman Sachs Bank USA] was able to finance their clients as much as I was back at Citi,” referring to a time before Goldman opened its depository bank.

He also seemed to take aim at some of the more confusing elements of Dodd-Frank. While talking about the cost of funds, Weill said this: “I think the capital markets are going to be more negatively impacted by the investment banks or the trading operations not being able to make markets and — how do you define what’s market-making and how do you define what’s for your principal account? The markets worked fine before, the commercial paper market worked fine and I think that can work fine again if people have confidence in how the financial industry is structured.”

This echoes a critique of Dodd-Frank launched both from the boardroom and Occupy the SEC: how is an investment bank to make clear what is market-making (which can be lucrative), what is a hedge and what is a bet? The law stopped short of the Glass-Steagall separation, but still sought to limit big banks’ ability to take on risk with depositors’ money, leaving them in a strange regulatory grey area.

While most who speak for the industry seem interested in a repeal of Dodd-Frank, it’s refreshing to see someone like Weill call for more regulation. After all, he knows the monster he helped create quite well. Whether it’s realistic or not, at the very least his argument asks for more of those in the finance industry: “Creativity, ingenuity and brainpower of the people is much more important than size,” he told CNBC.

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