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The Secret Plan for Citigroup
In some ways there are regulators who believe BofA is an even bigger headache than Citigroup. Unlike Citi, Bank of America has a real business—Merrill’s investment bank, brokerage operations and a large, well-functioning branch system in the U.S. Citigroup has almost none of the above. That’s why regulators have turned their attention to BofA, including the competence of its current management and CEO Ken Lewis (sources say board members have been quietly calling potential successors to Lewis to see if they would join the firm even before his official exit date is set in stone).
In other words, if Citi went under, the damage would be relatively contained; if BofA folds, systemic risk would be compounded by the implosion of viable businesses.
There’s just one problem with this approach: With Citigroup lingering, there’s still a chance for it to get into trouble. By leaving Citi comatose, it could still trigger a run as consumer confidence in the bank diminishes over time. The firm is so big, so unwieldy that it can’ t be managed, never could, and it never would. As bad as the Wall Street executives have been at managing Citi, I can make a good case that the government, which now signs off on just about everything Pandit & Co., does, will be worse.
Need I mention Freddie Mac and Fannie Mae?
In some ways Citigroup reminds me of this nasty neighbor I had as a kid. He was a hazard to both the community and his wife and kids whom he used to abuse on a daily basis. Then one day he got into an accident; I believe he fell off the back of a truck, cracked his skull and was in a coma. We prayed for his timely exit from this world but he hung on, first for weeks and then for months.
“Neither God wants him nor the devil wants him,” my father remarked with a laugh one afternoon as we laid odds on whether he would live or die.
The man did in fact live, miraculously given to size and scope of his head injuries, and once he was able to function again, he returned to his nasty old self. It was a shame, we all thought, if he had died, it would have spared everyone so much trouble.
I can’t but help feeling the same way about Citigroup.
Charles Gasparino is CNBC's On-Air Editor and appears as a daily member of CNBC's ensemble. He is a columnist for the Daily Beast and a frequent contributor to the New York Post, Forbes, and other publications. His book about the financial crisis, The Sellout, is scheduled to be published later in 2009.
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Charles Gasparino is CNBC's On-Air Editor and appears as a daily member of CNBC's ensemble. He is a columnist for the Daily Beast and a frequent contributor to the New York Post, Forbes, and other publications. His forthcoming book about the financial crisis, The Sellout, is scheduled to be published later in 2009.
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Charles Gasparino is CNBC's On-Air Editor and appears as a daily member of CNBC's ensemble. He is a columnist for the Daily Beast and a frequent contributor to the New York Post, Forbes, and other publications. His forthcoming book about the financial crisis, The Sellout, is scheduled to be published later in 2009.
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Charles Gasparino is CNBC's On-Air Editor and appears as a daily member of CNBC's ensemble. He is a columnist for the Daily Beast and a frequent contributor to the New York Post, Forbes, and other publications. His forthcoming book about the financial crisis, The Sellout, is scheduled to be published later in 2009.
is this journalism?
CG: "in other words, if Citi went under the damage would be relatively contained"
FYI Citigroup has a $2 trillion dollar balance sheet (not to mention items off-balance sheet). It is a lender or counterparty to almost every large corporation on the planet. Its failure would make the Lehman debacle look like a small stock market correction. Damage easily contained? Your logic is absurd. This is more of the thoughtless reporting based on "sources inside" we've come to expect from CG.
You compare Citigroup to a near paralytic neighbor who was so awful he did NOT desire to die? This is the typical classless garbage we are used to from you.
Your personal attacks are tiresome. Your desire to make noise rather than be a competent journalist sets a bad example for young writers. And your taste is absolutely grotesque.
Citigroup is a failed roll-up in the world of finance. It was horribly managed in almost every respect. Find a new story.
LOL! "sources inside" and your sources are...? right, your imagination... hah get over yourself man, you don't know any more than CG. if anything, based on your belligerent writing style, you know much, much less.
Citi was Obama's 7th largest 2008 contributor, and Citi employees donated over $100k to the "inauguration".
Is there a reason this is not mentioned in this article?
..because its irrelevant. compare the actual dollar amounts of campaign contributions, not the "ranking." the evidence is all in how you interpret (or misinterpret) the data.
According to our friendly DBBlog researcher, Connie47, Citigroup contributed $657,268 to Obama and another $320,251 to McCain.
I didn't know that Citi gave Obama that much, but we all know ALL presidents have a certain amount of STRINGS ATTACHED. I'm unsure if we should let them fail.
Citi's hubris is pervasive. Arrogance and greed manifest themselves to every coner of their unwieldy organisation. Questionable deals, murky side contrats and general behavior incompatable with decent conduct. What happened with their highly touted pronouncement of "Conducting themselves according to the "Highest Ethical Standard'? Did not Prince, Rubin and Kaden (Head of Corporate Governance) cash in their chips for $150M before the stock fell out the window? And what do we as a society do about it? They are a joke and a bad one at that...and so are we as we put up with it. Shame on us all. By refusing to act when we knew or suspected makes us accomplaces after the fact. It's just another indication that greed and Mammon are what control us now.
I try to avoid going into any building with the Weill name on it in New York City as well as Ithaca. It really is not that easy as he seems to be spreading his Ill gotten gains on the front of many important medical ,educational and cultural instituitons . His downfall started with the problems with his daughter leaving his firm and then with the biggest thief on Wall Street not in jail his all star analyst who was behind Bernie Ebbers.
Who should we hate more? Citi or Goldman Sachs? Frankenstein or Dracula?
Boy, johnjohnson, that is a tough call!
Give them more money, that willl do it..
Congrats, Charlie. At last, a well thought out article from you.
One question, tho. If the BoA is busy looking for Lewis' replacement, why can't the fed find a competent CEO for Citi and push Pandit, who has proven he has no talent for this business, out?
You are right when you say, "There's just one problem with the fed's current do nothing approach: With Citigroup lingering, there's still a chance for it to get into trouble."
There are still many, many chickens in the Citi hen house--and lots of foxes inside and outside the coop ready and able to wreak additional havoc.
Citi has been caught twice by the Japanese Monetary Authorities in violation of strict anti-money laundry rules. Incompetence is a great excuse but it requires more digging.
"Now comes word from sources close to the bank that the government-namely the Federal Reserve..."
The Federal Reserve is no more federal than Federal Express. Either you are too ignorant to know the difference, in which case you should not be doing any reporting for any news source, or you are in the know and just propagating the lies and deceit told in this country to keep everyones head in the sand. Wake up people!!
its official: gasparino is a moron.
he's a hack that had a few good breaks on a couple stories in the past. mainly about gov corruption, eg bernard kerik, and legal stories, ie purposely leaked stories from spitzer ag office, and suddenly he's a finance business expert...come on.
his so-called sources are unreliable at best or have little or no idea about what is actually going on inside citi.
trading desks within citi are having great years and are increasing market share. its not a surprise when one thinks logically about it. there is less competition among sell side market participants, and few of the remaining players have the reach of citi. unlike many previous competitors, it did not go through major disruptions to business like buyouts or mergers or failure (near failure yes but its still an independent survivor) and it began its own downsizing long before other banks and brokers started layoffs. while clearly not the market leader in the us, it still has among the best franchises in the states and it is unmatched in its international footprint and its capabilities globally.
its a wonder this story about how bad all the banks are, still has such legs. blame the banks fine. hate them when things are bad, hate them when things are good. nothing new.
gasparino is grasping at anything to keep himself relevant. stories these days with populist rhetoric always get a minimum amount of attention even with little or no real substance.
Good article. As with his CNBC comments good insight into what goes on behind the financial curtain.
Perhaps you have misread the intent? Consider the possibility of a major financial institution which serves as an international payments gateway and can serve to fund Congressional initiatives without a vote or to reward friends without a direct audit trail. Loans for our friends? Affordable Housing loans? Conduit and repository of billions of dollars in allocated, but unspent funds? The possibilities for democrat misuse are almost endless.
Thank you.
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