One-Stop Shopping Becomes Just Stop Shopping

Citigroup is now resigned to giving up its "financial supermarket" business model after ten years of trying and one particularly bad year of failing miserably.

The eventual breakup of the supermarket model—in which a bank handled a client's every financial need, from investing to insurance—would mean that Citigroup would become more of a traditional bank like JP Morgan Chase.

The core of the remaining company would be a global wholesale bank with some investment banking capability and include private and regional banking.

Citigroup's former CEO Sandy Weill developed the financial supermarket model in 1998 when he fought successfully to allow the merger of Travelers with Citibank. The merger circumvented the Depression-era Glass-Steagall Act that separated commercial and investment banking and helped pave the way for the banking behemoths that have been crumbling during the credit crisis. Glass Steagall was repealed in 1999.

It was the formation of Citigroup on Clinton's watch that really spelled the death of Glass-Steagall. I worked for Primerica, their residential financial services division, briefly in 2002, and Sandy Weill was most certainly pushing the "Wal-Mart of Finance" model for the new combined company. Very much so the division was preaching the Gospel of ReFi at every opportunity, and uncomfortable with the notion of convincing everyone I knew to refinance their homes coming off the post 9/11 recession while selling them insurance, stocks, and everything else, I left the company.

I knew it was going to go all bad eventually with Greenspan's dirt cheap rates. I'd like to think I left because I smelled a rat, but the truth is I wasn't good at selling people on bullshit. There was tons of money to be made by the people who were good at doing everything they did, and like most folks I was with the flood of displaced workers coming off the dot-com bust looking for a new industry. I had the math and the financial know-how, but all that did was allow me to crunch the numbers and see how bad of a deal people were getting in the end should housing prices ever fall or rates go back up...or both, as they would eventually.

"Eventually" of course turned into last year. Citigroup has been at the heart of this mess since the beginning, and to see them abandon the business model that started this whole fiasco is a little gratifying. It does nothing for the thousands of Citi employees shown the door as a result however...and the millions losing their homes, jobs, and financial freedom thanks to companies like this.

You don't get something for nothing.