By Simon Johnson
Today, perhaps following our earlier recommendation, Mr. Vikram Pandit – CEO of Citigroup – will appear before the congressional oversight panel for TARP. (Official website, with streamed hearing from 10am).
This is an important opportunity because, if you want to expose the hubris, mismanagement, and executive incompetence – let’s face it – Citi is the low hanging fruit.
Citibank (and its successors) has been at the center of every major episode of irresponsible exuberance since the 1970s and essentially failed – i.e., became insolvent by any reasonable definition and had to be saved – at least four times in the past 30 years (1982, 1989-91, 1998, and 2008-09).
In the last iteration, Citi was guided by Robert Rubin - self-styled guru of the markets and sage of Washington, a man who likes to exude ”expect the unexpected” mystique – directly onto the iceberg at full speed.
Mr. Pandit was brought in by Mr. Rubin to refloat the wreckage, despite the fact that he had no prior experience managing a major global bank. Mr. Pandit’s hedge fund was acquired by Citi and then promptly shut. And Mr. Pandit’s big plan for restructuring the most consistently unsuccessful bank – from society’s point of view – in the history of global finance: Reduce the headcount from around 375,000 to 300,000.
Here are five questions the FCIC should ask. This line of enquiry may seem a bit personal, but it is time to talk directly about the people, procedures, and philosophy behind such awful enterprises. Continue reading →
Why Not Break-Up Citigroup?
By Simon Johnson
Earlier this week, Richard Fisher – President of the Dallas Federal Reserve Bank – captured the growing political mood with regard to very large banks: “I believe that too-big-to-fail banks are too-dangerous-to-permit.” Market-forces don’t work with the biggest banks at their current sizes; they have great political power and receive almost unlimited implicit subsidies in the form of protection against downside risks – particularly in situations like now, with the European financial situation looking precarious.
Mr. Fisher is an experienced public official – and also someone with a great deal of experience in financial markets, including running his own funds-management firm. I increasingly meet leading figures in the financial sector who share Mr. Fisher’s views, at least in private.
What then is the case in favor of keeping mega-banks at their current scale? Vague claims are sometimes made, but there is very little hard evidence and often a lack of candor on that side of the argument. So it is refreshing to see Vikram Pandit, CEO of Citigroup, go on the record with The Banker magazine to at least explain how his bank will generate shareholder value. (The interview is behind a paywall, unfortunately). Continue reading →
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Tagged citigroup, Richard Fisher, Vikram Pandit