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The 'Citi That Never Sleeps' Has Good Reason Not To

November 22, 2008 10:08 PM

Abc_golodryga_081112_mnABC News' Bianna Golodryga reports: According to a variety of reports, among one of the issues Citigroup board members discussed behind closed doors on Friday was an ad blitz for Sunday morning newspapers reiterating their famous ad campaign, "You can feel confident that Citi never sleeps."

Still, the bank is leveraged beyond belief ... and the fear of further massive write-downs has nervous sellers shrinking the company's market cap to just over $20 billion, down nearly $80 billion from a year ago. The stock is down more than 50 percent this week alone, closing at $3.77 a share Friday afternoon. Some analysts expect the stock to fall to $1.00 if not lower by as early as next week if the company doesn't come up with something drastic.

It's clear that Citi will not be allowed to fail. But here's where things get interesting. There are a few options for Citi, none of them are ideal.

Citi is made up of four major divisions and has more than $2 trillion in assets on its balance sheet, thus likely making it just too big for one bank to buy whole, not to mention U.S. regulatory issues getting in the way.

There was some chatter that the company could possibly be acquired by a large European bank like HSBC. But that's not likely.

There is also talk that the company could be broken apart, with various U.S. banks stepping in. Goldman Sachs was said to have led some discussions with Citi, leading to jokes on the street that a merger between the two would be called "Sachs in the Citi."

But no likely deal can be brokered between any banks without -- you guessed it -- your tax dollars.

In fact, a few people familiar with the story tell me that a very likely scenario will be that the government will step in and in effect, become Citi's largest shareholder.

Which has led to colorful reaction from some big wall street players. Most blame Citi itself for its current situation. Indeed, there have been calls for Citi to break up its divisions for a few years now.

And while many people defend CEO Vikram Pandit and say there was little he could do to turn the company around since stepping into the role last December, others are not so kind.

One source familiar with Pandit's career who asked that his name be withheld blames it all on the man in charge, and the board that supports him.

"The board and management teams are the worst in the history of American capitalism," the source said.

Why does he say this? Well Pandit's path to Citi is a rather unusual one. After being overlooked for the top job at Morgan Stanley, Pandit started his own hedge fund called Old Lane. Last year Citi bought the fund for $800 million -- and with it, brought Pandit into the Citi family (and gave him more than $150 million for the fund).

Within a few months, Pandit was running the company.

And the hedge fund went out of business. "Ask anyone inside or outside of the company..and they'll tell you, Pandit is commonly referred to as Vikram Bandit," the  source said.

The source goes on to tell me, "This idiot blew up this hedge fund and then the board puts him in charge of Citi. ... I wouldn't give Pandit a quarter to buy me a gumball."

Others compare the board at Citi to the U.S. auto industry -- "out of touch, out of time, and out of money."

And they suggest that any sort of government bailout should only come with requirements for major management reshuffling at Citi.

November 22, 2008 | Permalink | User Comments (11)

User Comments

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Why is it that the Economis Crisis of 2008 is looking more like it is a plotted and planned set of events.

The Stock market plunges but never Crashes.

The banks go down but never under.

The Government is buying Corporate America.

The Auto Companies do not fall into the money making scheme of things and the empolyee just regular people, so they get a thumbed nose at them. Keep the people in Desperate mode.


Got to hand it to the Democrats, they must love a plan coming together. As this one is.


"True individual freedom cannot exist without economic security and independence. People who are hungry and out of a job are the stuff of which dictatorships are made."
Franklin D. Roosevelt


"Don't interfere with anything in the Constitution. That must be maintained, for it is the only safeguard of our liberties."
Abraham Lincoln

Posted by: seah | Nov 22, 2008 11:33:12 PM

Citi deserves to fail and go bancrupt. Why are these people running these businesses so stupid? Gee, it couldn't be because they know their bought and paid for croonies in government will not let them fail but instead bail their stupid asses out with tax payer's money that we have to borrow from China?The people heading our government are so corrupt it boogles my mind. I have NO confidence in our government. We need to vote in a special prosecutor to investigate our government.

Posted by: Sandy | Nov 22, 2008 11:50:01 PM

Why do Wall Street bankers call themselves capitalists and free marketers when they appear to be the world's leading socialists?

Posted by: Joe the Plumber | Nov 23, 2008 2:14:41 AM

If the taxpayers do get involved, then one of the conditions would be approval of all executive compensation from all Citi sources. This would make the executives think twice about government help.

BTW, in the past year, my sons, who have lousy credit, have received numerous invitations from Citi to receive Citi's credit cards. These always go into the trash. From what I have seen, Citi badly needs to revamp its credit approval process.

Posted by: Beto | Nov 23, 2008 6:13:05 AM

We can not always capitalize the profit for wall streets and socialize the losses for Main Street. All failing companies should restructure for the 21st century global market by going for chapter 11 stage. Chapter 11 stage is not chapter 7 stage.

Chapter 11 stages was made by law makers for the same purpose that companies which are in bad shape can restructure themselves from all corners. Able to renegotiate the contracts, change the management, and get tax exhumations. Today all these industries are not competitive, chapter 11 will help these companies to reduce and renegotiate the cost of labor, real state cost, legacy cost, healthcare cost, retirement cost, ideal worker cost, access labor cost etc.

How many industry we can bailout Real state Industry, Financial industry, Auto Industry, Steal Industry, Timber Industry etc. We should see the long-term approach towards all these industries rather than short-term bailout approach.

Let’s call for a new world Industiral approch. Lean, smart and forward looking approch. Devil is in the details. We should focus on stake holder wealth creation rather than short term share holder gain.

Posted by: GauravParakh | Nov 23, 2008 6:17:22 AM

LOL @ seah. This is supposedly the fault of the Democrats??? AFter 8 years of GWB wasting our hard earned tax dollars in the middle east and his completely unrealistic and unfair tax and economic policies which dating back to Ronald Reagan are known to fail, you have the nerve to blame this on the Dems? Not sure what cave you are living in, but it is time to come out.

Posted by: JRS | Nov 23, 2008 8:14:10 AM

Seah, correct me if I'm wrong, but aren't Bush and his economic advisors Republicans? If they are, then blaming this on the Democrats means you are still in bed and dreaming about being President Bush's best friend.

Posted by: LOfromMO | Nov 23, 2008 9:15:03 AM

I think if the government has to bail our citi the government should impose more regulations. Regulations should include restricting salaries etc, and reoranization of corporate funds/ bonuses. If the taxpayers are responsible enough to lend these companies money we (the taxpayers) should have a say in how the funds are disbursed throughout the corporation. Any financial savvy person can cut the fat and save jobs. Get rid of the higher paying people save the lower paid workers and move on. One annual bonus could equate to several lower paid employees annual salary.

Posted by: TLB | Dec 1, 2008 4:19:37 PM

Prophecy is god's warning to mankind to consider the horrifying end results of the choices we are making. It shows where our disobedience to god is leading us! It is god's effort to convince us indidually to turn our lives ti him while there is yet time (ezekiel 33:11;zephaniah 2:1-3). How our land will be healed;our land is sick. It desperately needs the healing that only God can supply,but that can only happen when we humble ourselves and pray and truly sincerely seek God's face-and Repent of their wickedness! Read isaiah 45:22-25. God bless us all!

Posted by: maria bishun | Dec 6, 2008 1:57:04 PM

The banking sector is the heart and core of america's economy.it contains the pillars suppoting the entire anglo-saxon economic model.Itks smaller pillars are snapping like twigs,and the big pillars are cracking under the strain. The whole thing is about to go,and repairs at this point can only be temporary quick fixes. All this is prophesied to occur.today's economic problems are a result of decades of compounding unsound buisness practices,dishonesty and greed.It's about to get worse yet all these events as prophesied in the word of God (BIBLE),and the Second Coming of Christ is near! This is real,and it cannot be ignored. God is the Alpha and the Omega.

Posted by: maria bishun | Dec 6, 2008 2:45:29 PM

If I understand correctly, taxpayers now own Freddie Mac, Fannie Mae, AIG, Goldman Sachs, several banks, possibly the entire auto industry,...
What are we getting in return? So far all these companies are being saved just to continue operating the same way that has proven ineffective.
My insurance premiums have not gone down, are cars going to be cheaper?

Posted by: carlos | Dec 9, 2008 9:39:24 PM

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