Citigroup Rises While Bank America Wallows

rcwhalen's picture


"Vikram Pandit’s last day at Citigroup swung from celebratory to devastating in a matter of minutes. Having fielded congratulatory e-mails about the earnings report in the morning that suggested the bank was finally on more solid ground, Mr. Pandit strode into the office of the chairman at day’s end on Oct. 15 for what he considered just another of their frequent meetings on his calendar. Instead, Mr. Pandit, the chief executive of Citigroup, was told three news releases were ready. One stated that Mr. Pandit had resigned, effective immediately. Another that he would resign, effective at the end of the year. The third release stated Mr. Pandit had been fired without cause. The choice was his."

"Citi Chairman Is Said to Have Planned Chief’s Exit Over Months"

The New York Times




New York -- So now that Vikram Pandit has exited stage right from the CEO position at Citigroup, a number of people have asked me about the Zombie Dance Queen.  Think Grace Jones with a dash of Tim Geithner and a taste for living assets.  And truth to tell, I am liking Citigroup more and more, albeit as a play on a future, as yet to be determined destination in terms of business model.

Source of happiness numero uno is the presence of Michael O’Neill on the board.  It did not click at first that this is the former Marine who fixed Bank of Hawaii (BOH).  Specifically he took BOH from a confused, troubled bank to one of the best performers in the large bank peer group. Kind of reminds me of the evolution of another hero, Jesse Jones of the Reconstruction Finance Corporation in the 1930s.  Jones organized private recapitalizations of several banks in Houston before going to Washington to work for President Hoover and later FDR.

I like the bifurcation of the role of Chairman and CEO at C.  The Chairman is responsible for the corporation, while the CEO works for the board of C. Having the roles separated is not only a good idea operationally, but it is good corporate governance.  It is high time that the Fed and OCC mandated that all bank holding companies separate the Chairman and Ceo positions as a matter of public policy under Section 12.  

Neither Americans nor investors should ever endure kings, the precise description of a Chairman/CEO archetype.  Had Pandit been both Chairman and CEO, we never would have gotten rid of him -- and the legacy of Sandy Weill, Robert Rubin and Dick Parsons. Call them the three headless horsemen of the fiasco at Citigroup.

The second thing about O’Neill is that he is not afraid to shake things up, even if it means dirty hands and hard work in a restructuring.  In the fine bit of reporting by  Susanne Craig and Jessica Silver-Greenberg of The New York Times, “Citi’s Chairman Steps Up to a Decisive Role,” they noted that O’Neill had been offered the top role at that other favorite Zombie Drag Ho, Bank of America (BAC).  

Indeed, the Times relates:

“Mr. O’Neill, who interviewed for the top position at Bank of America in 2009, a spot given to Brian T. Moynihan, advised that the bank be broken up, according to several people with knowledge of the discussion.”

Now Moynihan is just CEO of BAC, a fitting role for a man who is more personnel officer than operator.  Moynihan has spent the past few years buying time at BAC, but only as the problems associated with Countrywide and the bad old BAC mortgage business have festered.  Indeed, the bank’s bizarre legal strategy of denying responsibility for Countrywide in court has now been laid bare by the DOJ lawsuit.  Moynihan’s departure at BAC may be a necessary condition for fixing that particular Zombie Girl.  

But there are still several kings on Wall Street.  Jamie Dimon wears three hats and effectively dominates the board of JPMorgan Chase (JPM) without challenge.  John G. Stumpf of Wells Fargo (WFC) likewise wears the three hats of current chairman, president and chief executive officer of that large bank, weakening the corporate governance of WFC.  

Unless the CEO of a bank has a counter-weight on the board in the form of an independent chairman, cronyism and a lack of accountability often result.  C under Sandy Weill and Robert Rubin is sadly a case in point.  C was, by appearances, a board where no questions were asked and reckless risk taking was encouraged at the highest level.  The result was the financial failure of the Zombie Queen, but she’s still dancing as we can all see.  

For C and O’Neill, the question is whether anyone can shift the culture at this money center bank.  The core business of C is now corporate and consumer lending, with a capital markets arm as a sometimes profitable complement.  Changing C to the degree that Kelly shifted the business model at BOH would be a monumental accomplishment.  

When management at C has suggested a change in internal default targets, for example, my reaction has been “OK, why do we still need you?”   The irony is that the markets desperately need capacity in the area of subprime lending – once a money making machine for C and its true subprime peers like HSBC (HSB).  

One area that needs attention at C is the mortgage department, another segment where a lot of value could be created if the bank could only get itself organized in an operational sense.  It’s not like the mortgage market has enough capacity at present, especially in the area of non-conforming loans.  One key benchmark of O’Neill’s tenure as Chairman is the mortgage origination and servicing business at C.

C knows how to price subprime credit better than most banks.   Maybe Kelly might even consider spinning off the consumer lending business to focus on this opportunity in a non-bank context.  But it is unclear to me how Kelly can fix C by seeking greater virtue.  The best path might be to take the bank more into subprime, but with better spreads and risk control.  

The next shoe likely to drop is Brian Moynihan at BAC.  While the credulous souls who inhabit the world of Big Media like to treat Moynihan as corporate royalty (Betty Liu at Bloomberg TV comes to mind, but all are guilty), the fact is that his tenure at BAC has been a fiasco.  Moynihan has pursued untenable, bizarre strategies in dealing with BAC legal problems.  At the same time, BAC has shed businesses and revenue in a willy-nilly fashion, leaving the entire mortgage market to WFC and USBancorp (USB).

BAC was the first large bank to withdraw from wholesale and correspondent lending in residential mortgages, causing an immediate decrease in volumes.  The destruction of value under former CEO Ken Lewis and now Moynihan, his loyal henchman, has been monumental.  All of the new origination capacity of Countrywide has essentially been shed and then some, leaving uncertain how BAC is going to generate revenue going forward. BTW, look for the same volume and asset shrinkage at WFC now that the third party origination pipeline has been shut down.

Moynihan likes to brag about the BAC capital levels, something he may have learned watching Jamie Dimon, but neither man has adequately reserved for their respective mortgage meltdowns.  

In the case of Moynihan, the combined Countrywide, Merrill Lynch and BA legacy liabilities are easily worth double digits, especially given how things are proceeding in court.  While the $1 billion DOJ lawsuit against BAC gets a lot of attention, the real action is the civil claims.  If the Countrywide putback litigation against BAC fails to settle, then this situation becomes unstable. 

An adverse legal decision against BAC could provide a systemic shock to this name, financials and markets, one reason why I have for some time called for the appointment of a Receiver with respect to BAC and an orderly settlement of all claims with the support of regulators.  Do regulators really think that allowing BAC to suffer a double digit court judgment is good from a systemic perspective?  Think again.     

A BAC restructuring looks like the GM bankruptcy, but with a stronger cast and the active involvement of the Fed and FDIC.  Yet if we wait long enough, Moynihan could be forced to select the nuclear option and file bankruptcy for Countrywide -- this to buy more time. The trouble is that BAC is reaching the point where Plaintiffs are going to start winning outright in court.  Stay tuned. 

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
rosethorn's picture

BAC should be taken into receivership, dismantled, and disposed of piece by piece.  It's a Frankenstein's monster of years of acquisitions.

Benjamin Glutton's picture
Major Banks, Governmental Officials and Their Comrade Capitalists Targets of Spire Law Group, LLP's Racketeering and Money Laundering Lawsuit Seeking Return of $43 Trillion to the United States Treasury Published: Thursday, 25 Oct 2012 | 2:09 PM ET Text Size

NEW YORK, Oct. 25, 2012 /PRNewswire via COMTEX/ -- Spire Law Group, LLP's national home owners' lawsuit, pending in the venue where the "Banksters" control their $43 trillion racketeering scheme (New York) - known as the largest money laundering and racketeering lawsuit in United States History and identifying $43 trillion ($43,000,000,000,000.00) of laundered money by the "Banksters" and their U.S. racketeering partners and joint venturers - now pinpoints the identities of the key racketeering partners of the "Banksters" located in the highest offices of government and acting for their own self-interests.

In connection with the federal lawsuit now impending in the United States District Court in Brooklyn, New York (Case No. 12-cv-04269-JBW-RML) - involving, among other things, a request that the District Court enjoin all mortgage foreclosures by the Banksters nationwide, unless and until the entire $43 trillion is repaid to a court-appointed receiver - Plaintiffs now establish the location of the $43 trillion ($43,000,000,000,000.00) of laundered money in a racketeering enterprise participated in by the following individuals (without limitation): Attorney General Holder acting in his individual capacity, Assistant Attorney General Tony West, the brother in law of Defendant California Attorney General Kamala Harris (both acting in their individual capacities), Jon Corzine (former New Jersey Governor), Robert Rubin (former Treasury Secretary and Bankster), Timothy Geitner, Treasury Secretary (acting in his individual capacity), Vikram Pandit (recently resigned and disgraced Chairman of the Board of Citigroup), Valerie Jarrett (a Senior White House Advisor), Anita Dunn (a former "communications director" for the Obama Administration), Robert Bauer (husband of Anita Dunn and Chief Legal Counsel for the Obama Re-election Campaign), as well as the "Banksters" themselves, and their affiliates and conduits. The lawsuit alleges serial violations of the United States Patriot Act, the Policy of Embargo Against Iran and Countries Hostile to the Foreign Policy of the United States, and the Racketeer Influenced and Corrupt Organizations Act (commonly known as the RICO statute) and other State and Federal laws.

In the District Court lawsuit, Spire Law Group, LLP -- on behalf of home owner across the Country and New York taxpayers, as well as under other taxpayer recompense laws -- has expanded its mass tort action into federal court in Brooklyn, New York, seeking to halt all foreclosures nationwide pending the return of the $43 trillion ($43,000,000,000.00) by the "Banksters" and their co-conspirators, seeking an audit of the Fed and audits of all the "bailout programs" by an independent receiver such as Neil Barofsky, former Inspector General of the TARP program who has stated that none of the TARP money and other "bailout money" advanced from the Treasury has ever been repaid despite protestations to the contrary by the Defendants as well as similar protestations by President Obama and the Obama Administration both publicly on national television and more privately to the United States Congress. Because the Obama Administration has failed to pursue any of the "Banksters" criminally, and indeed is actively borrowing monies for Mr. Obama's campaign from these same "Banksters" to finance its political aspirations, the national group of plaintiff home owners has been forced to now expand its lawsuit to include racketeering, money laundering and intentional violations of the Iranian Nations Sanctions and Embargo Act by the national banks included among the "Bankster" Defendants.


steve from virginia's picture


Okay, Citi jettisoned Pandit: who was responsible? The board itself or Chairman Murphy? Whaffo? (He cheats at golf ...)


Pandit seems more like a victim or the usual corporate back-stabbing and petty undermining, not some grand strategy to make Citigroup into a model corporation for the latter 21st century. (To do that, the company needs to be broken up to a pre-Sandy Weill configuration.)


Now (according to Whalen) Citi expands into subprime lending -- while BofA needs to. Why not expand into street-corner drug sales at the same time? Wachovia was notable for money-laundering, why not?  Some forms of finance will always pay (contraband) while other will never provide anything like a return ... lending to deadbeats against ridiculous collateral is one of them.

swissaustrian's picture

Citi has suddenly built a huge silver derivatives position (see here: ):

According to the OCC, Citibank has increased their exposure to silver derivatives MASSIVELY over the first two quarters of 2012. Here's the facts on table 9 (PREC METALS is mainly Silver):

1/1/2012 $44 million

3/31/2012 $5.7 Billion

6/30/2012 $9.5 Billion


See p. 34:


El Hosel's picture

Not to worry,  just old fashioned banking... "containing" inflation expectations. Don't want metals giving the "Market" the wrong idea.

El Hosel's picture

Regulators fine Citi 2 Million for "improper discloser" on Facebook IPO.... The IPO that lost 50 billion dollars in market cap in a few weeks. Crime pays is an understatement for the Bank-stars.

fonzannoon's picture

Interesting. JP Morgue has not exactly imploded though.

Never One Roach's picture

Another record high banker bonus year is all that counts for Ben and the Boyz.

Mark Wilson's picture

Well now. Here we have Christopher Whalen who apparently thinks BAC sucks. Then we have Meridith Whitney who likes BAC. Stay tuned indeed.

fonzannoon's picture

fuck all these banks and anyone who supports or defends them

Northeaster's picture

How is Citi healthy when it LOST over $2 BILLION when they received over $2 BILLION in bailout funds?

Oh, and another $2.5 TRILLION from The Fed, as part of the $16.1 TRILLION backdoor secret loans:

Sorry Chris, these people, and those that enabled them, should all be hanging from fucking lampposts for what they have done to the rest of us.

El Hosel's picture

"How is Citi healthy"?..... Mark to make believe by the billions.

Widowmaker's picture

So, which horse is prettiest at the glue factory?

Put Widowmaker on the list that told BAC to go fuck itself this week -- hello credit union.

Eugend66's picture

Fuck Citi and V Pandit. Ohh ... , let Pandit  rot in hell and because corporations are ppl, Citi may rot in hell too !! Leaches they are.

new game's picture

the early birds are drawing checks(on disability), eating for free(at the bird feeder shiting on everybodies lawn furnature) and having a beer on the porch all while "off to work working stiff" go. they are ahead of the curve. not my plan, though as i got scruples. my dough is rising in the oven that is debt free. I WILL NOT BE PART OF THIS FINANCIAL rigged game-long gone! 


all while these fucks at wfc c gs ms jpm and bac manipulate monies and politicains to flow the dough to there leveraged machines off profit.

so, you are sugesting i should go long and suport this. fuck off on that idea.

sticking to the plan glock and gold

gdogus erectus's picture

Citigroup Rises While Bank America Swallows. There, fixed it.

NotApplicable's picture

Gee, sure didn't take long to abandon reading this tripe.

And truth to tell, I am liking Citigroup more and more...

Fuck you, you mafia-enabling bastard! May all your assets be rehypotheticated, and all of your liabilities called in.