A former Citicorp boss offers an apology

John Reed, who helped engineer the merger that created Citigroup (C), apologized for his role in building a company that has taken $45 billion in direct U.S. aid and said banks that big should be divided into separate parts.

"I'm sorry," Reed, 70, told Bloomberg News. "These are people I love and care about. You could imagine emotionally it's not easy to see what's happened."

• Bing: Read more about John Reed

Citigroup was formed in 1998 when Citicorp, a commercial bank, combined with Sanford I. Weill's Travelers Group, which owned the investment firm Salomon Smith Barney.

The insurance operations of Travelers was later spun off into Travelers Companies (TRV), which has replaced Citigroup in the Dow Jones Industrial Average ($INDU).

Citigroup lost $27.7 billion in 2008 and took $118 billion in write-downs.

Now 34%-owned by the Treasury Department, Citigroup sought help in the wake of a credit freeze that claimed three of Wall Street's biggest firms and led to the deepest recession in 70 years.

Congress' overhaul of U.S. financial regulations should include ordering banks to hold more capital, ensuring executives' compensation is aligned with long-term profitability and banning firms that take deposits from also engaging in equities and fixed-income trading, Reed said.

"I would compartmentalize the industry for the same reason you compartmentalize ships," Reed told Bloomberg. "If you have a leak, the leak doesn't spread and sink the whole vessel. So generally speaking you'd have consumer banking separate from trading bonds and equity."

Lawmakers were wrong to repeal the Depression-era Glass- Steagall Act in 1999, Reed said.

At the time, he supported overturn of the law, which required the separation of institutions that engaged in traditional customer banking services from those involved in capital markets.

"We learn from our mistakes," said Reed. "When you're running a company, you do what you think is right for the stockholders. Right now, I'm looking at this as a citizen."

Reed first went public about his feelings on Glass-Steagall on Oct. 21 in a letter to The New York Times. He supported former Federal Reserve Chairman Paul Volcker's call to separate banks and investment banks.