[ by Howard Haykin ] Sandy Weill, who inspired the development of financial supermarkets and who sculpted much of Jamie Dimon's financial acumen along those lines, now is encouraging the financial industry to take a new, somewhat foreign and unexpected direction in the coming years - essentially, a return to Glass Steagall.

"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 going to be too big to fail." -- Sandy Weill, former Citigroup CEO, during Wednesday's CNBC "Squawk Box" Interview.

Mr. Weill's words are unquestionably "rich with irony," says NYTimes reporter Michael de la Merced.  After all, it was Mr. Weill who transformed an insignificant Baltimore-based lender into the towering financial services provider named Travelers, which he then merged with Citicorp in 1998 to create a $70 billion financial empire.  And, in doing so, he largely rendered Glass-Steagall irrelevant and ultimately it was dropped from the rulebooks.  The Graham-Leach-Bliley Act of 1999 formally blessed the creation of the universal banking model, almost a formality. Mr. Weill's Wednesday Interview. Mr. Weill said that Glass-Steagall had essentially dissipated by the mid-1980s;  the only remaining regulation he sought to erode was a prohibition on banks conducting insurance underwriting.  Still, for years he proudly boasted of his accomplishment, which fulfilled his long-held dream of creating a far-flung financial empire.  Among his most notable possessions was a huge wooden plaque bearing his portrait and a list of his accomplishments.

One of them read simply, "The Shatterer of Glass-Steagall."

Citigroup Then Becomes Too Unwieldy. All that was before Citigroup proved to be too unwieldy to manage, hunched over by the weight of disparate businesses with little in common and with byzantine corporate structures that made running the behemoth incredibly difficult.  And that was before the financial crisis of 2008 laid low the American banking titans, with Citigroup needing bailouts by the federal government to stay alive, giving rise to the phrase "too big to fail." John Reed, who was Citicorp's CEO at the time of the 1998 merger, and stood as Mr. Weill's counterpart at Citigroup, has already apologized for his role in midwifing the birth of the banking supermarket.  And now Mr. Weill is starting to come around with his reflections and concerns.

"I'm suggesting that they be broken up so that the taxpayer will never be at risk, the depositors won't be at risk, the leverage of the banks will be something reasonable," he told CNBC on Wednesday.

He added that by making banks smaller, they could become more profitable.

[C-I Note: Or perhaps it's just sour grapes for Mr. Weill, who misses the good old days on Wall Street, and is jealous of Jamie Dimon and the current financial leaders, whom Mr. Weill may feel don't know as much as he does.  For a philanthropic individual, would not be very charitable.]

For further details, go to:  [Dealbook, 7/25/12].