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Send Citi, BofA to 'Minor Leagues' for Breakup: Mayo

Tuesday, 1 Nov 2011 | 11:06 AM ET

Big banks that haven't been performing should be broken up before they become a threat to the entire financial system, analyst and author Mike Mayo told CNBC.

Columns and steps
Columns and steps

Referring specifically to Bank of America and Citigroup , the managing director at Credit Agricole said the institutions are classic examples of banks where shareholders should be able to step in and remove ineffective executives.

Bad corporate governance — and not fundamental weaknesses of capitalism — is at the heart of why so many people distrust banks, said Mayo, who called for accountability rather than more regulation. Mayo is author of the upcoming Exile on Wall Street: One Analyst's Fight to Save the Big Banks From Themselves.

"Let's go bank by bank, company by company, CEO by CEO, chairman by chairman, let's just go down the list...and start cleaning house," he said.

Looking at specific institutions, Mayo pointed to Citigroup Chairman Dick Parsons and said, "I don't know how he still has a job."

"If you haven't performed for a number of years — like a decade — then get out of the major leagues and go back to the minor leagues, and you should be broken up. But I think the shareholders should lead the way," he said. "If you have a company like Citigroup — maybe one or two others out there — that haven't performed over more than a decade, then I say let's break them into more manageable pieces."

Where Wall Street Stands Right Now
Insight on what happened right before the financial crisis and what is happening right now, since the crisis occurred in 2008, with Mike Mayo, Credit Agricole Securities research analyst/managing director/ financial analyst, who says the checks and balances are still yet to be put into place where the numbers are still unsure. He uses MF Global as an example of how fragile the system still is.

Parsons in particular drew Mayo's ire for leading the firm's compensation committee while the bank weathered storm after storm during the last decade. Despite the circumstances, top executives suffered no negative effects to their paychecks, Mayo pointed out.

"When I look at the current CEO compensation plan, I feel it is rigged," he said, citing "an abnormally low threshold to get the incentive pay."

Citigroup representatives did not immediately reply to a request for comment.

Citi's bad bets on subprime mortgage served as one of the first warning signs of the credit crisis. The company faced up to $11 billion in mortgage writeoffs and survived primarily thanks to a government bailout.

Yet Mayo said capitalism itself did not cause the crisis.

"We've had butchered capitalism. This is not capitalism," he said. "Capitalism didn't fail. Not having capitalism is what caused the system to break down. Capitalism is having many eyes looking at the market acting on what they see, and being incented to act."

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