Too Big to Succeed?

By Steven Pearlstein
Monday, November 24, 2008; 10:24 AM

Of all the rescues mounted by the government so far this year, none carries with it more symbolism, or more irony, than that of Citigroup.

Until recently, Citi was not only the largest U.S. financial institution, but the very embodiment of the new financial order. Under the relentless empire building of former chief executive Sanford Weill, it was Citi that brought down the old regulatory wall that had separated commercial banking from investment banking and insurance.

The combination of Citibank with Solomon Smith Barney under the bright red umbrella of Travelers Insurance was accepted with a regulatory wink and nod by the Federal Reserve while then-Fed Chairman Alan Greenspan worked to persuade Congress to make it legal by repealing the Glass-Steagall Act, put in place during the Great Depression to prevent another market crash like that of 1929. Now that another market crash has required the government to rescue Citi, there will certainly be those who wonder whether the New Dealers didn't have it right all along...

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