Sandy Weill says banks should split up FINANCE

Sandy Weill talks with his wife and a reporter at his Sonoma home on Tuesday, May 22, 2012 in Sonoma, Calif. Sandy Weill talks with his wife and a reporter at his Sonoma home on Tuesday, May 22, 2012 in Sonoma, Calif. Photo: Charlie Gesell, Special To The Chronicle Photo: Charlie Gesell, Special To The Chronicle Image 1 of / 1 Caption Close Sandy Weill says banks should split up 1 / 1 Back to Gallery

New York --

Sandy Weill is having a change of heart.

Weill, the aggressive dealmaker who built Citigroup on the idea that in banking, bigger is better, said Wednesday that he believes big banks should be broken up.

Speaking on CNBC's "Squawk Box," the 79-year-old Weill appeared to shock the show's anchors when he said that consumer banking units should be split from riskier investment banking units. That would mean dismembering Citigroup as well as other big U.S. banks, like JPMorgan Chase and Bank of America.

It's an ironic twist coming from an empire-builder who nursed Citigroup into a behemoth. And it's directly opposed to the stance of the industry's leaders, like JPMorgan CEO Jamie Dimon, who have been trying to convince regulators and lawmakers of just the opposite, that big banks do not need to be split.

Weill said the radical change is necessary if U.S. banks want to rebuild trust and remain on top of the world's financial system. Weill also criticized banks for taking on too much debt and not providing enough disclosure about what's on their balance sheets.

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Investment banking, which offers services like trading stocks and packaging loans into securities, can be spectacularly profitable in the good times and spectacularly unprofitable in the bad. Consumer banking, the business of making loans and accepting deposits, generally offers a steadier, if slower, way to make a profit. Until the late '90s, federal regulations kept them largely separated.

Weill's professed conversion set off a flurry of reactions. The banking industry's critics hailed it as proof that the biggest banks should be split. "Sanford Weill is one of many banking industry experts who have observed that too big to fail is often too big to manage," said Sen. Sherrod Brown, D-Ohio.

Others were unimpressed.

Joshua Brown, a New York investment adviser who writes the Reformed Broker blog, called Weill "the original architect of Too Big to Fail" banking and noted that Weill didn't apologize "for the Citigroup he built or its imitators."

"Perhaps this is about burnishing his legacy," Brown wrote.

Weill said he hadn't talked to JPMorgan's Dimon and Vikram Pandit, Citigroup's current CEO, about his new stance. Dimon was Weill's protege before being ousted in a power struggle in the late '90s. Pandit took over at Citigroup after Weill's friend, Chuck Prince, lost the job.

Asked what he thought their reaction would be, Weill replied, "I don't know. You'll find out."

A Citigroup spokeswoman declined to comment. A JPMorgan spokesman didn't immediately return a call seeking comment.

Weill retired as CEO of Citigroup in 2003 but remained chairman until 2006, building it into a giant that offered both consumer and investment banking.

Asked about his about-face, Weill said he had been getting his thoughts together over the past year.

"I think the world changes," he said, "and the world that we live in is different than the one that we lived in 10 years ago."