The FDIC is pushing for a shake-up of Citigroup’s top management, and chief executive Vikram Pandit is likely to be the fall guy, US media reported.
The Federal Deposit Insurance Corporation (FDIC) is pushing for a shake-up of Citigroup’s top management, and chief executive Vikram Pandit is likely to be the fall guy, US media reported on Friday.
FDIC chairperson Sheila Bair encouraged another government regulatory committee to downgrade Citigroup’s confidential rating within the government, allowing the FDIC greater control over the firm, according to The Wall Street Journal (WSJ).
The Journal said federal officials have approached Jerry Grundhofer, the former US Bancorp CEO who recently joined Citigroup’s board, to gauge his interest in the top job. Grundhofer is seen as a good fit as he steered US Bancorp to profitability while avoiding the risky lending that burnt Citigroup.
“Management needs to be re-evaluated,” Sheila Bair told Bloomberg on Friday without taking any names. “Have they been doing a good job? Are there people who can do a better job? There will be an evaluation process. We’re requesting it as part of the capital plan.” She made it clear that some bank chief executives would end up being replaced.
There is no doubt that Pandit is on thin ice if the FDIC gets the management shake-up it is after. “FDIC officials are concerned about the lack of senior executives with experience in commercial banking. Pandit comes from an investment-banking background, but most of the bank’s current problems stem from troubled consumer loans,” said WSJ.
Pandit, 52, became boss in 2007 and his loyalists, of which there are legions in New York, say he has been effective in cleaning up Citi’s financial mess. “It is no secret that Sheila Blair hates Vikram’s guts. They had a huge tiff after Citi lost out to Wells Fargo in the play for Wachovia,” an executive in Citigroup who did not want to be named told DNA Money. “She would love to have his head on a platter. This is good old-fashioned revenge — nothing to do with the bank or his performance,” the executive added.
Pandit had a bitter fallout with the FDIC in September last year, when it agreed to buy Wachovia in a government-arranged marriage. Days later, however, Wells Fargo upended Citi by putting in a bigger bid for Wachovia. Pandit felt blindsided and faulted Bair for endorsing the Wells Fargo bid over Citigroup.
The Journal said that on a 2 am conference call at that time, the “usually mild-mannered Pandit launched into an obscenity-laced tirade” about the FDIC chairperson.
Some at Citigroup say the deal’s demise was the kicker for a plunge in Citigroup’s stock price, one cause of the federal bailouts. Citigroup has subsequently received $45 billion as part of the Troubled Asset Relief Programme.
American banks such as Goldman Sachs, Morgan Stanley and JPMorgan Chase, which got a clean bill of health in recent stress tests, are queuing up to repay government money. On the other hand, the Fed estimated that Citigroup could face up to $104.7 billion in loan losses through 2010 in a worst-case scenario. The test found that Citigroup could face nearly $20 billion in losses in its huge credit card portfolio.
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