March 18, 2008--The Blind Hand At Citibank

During the same week that Bear Stearns bit the dust, seeing the value of its stock evaporate, with Lehman Brothers seemingly not far behind, and the Federal Reserve jumping in to bail them out and lowering interest rates to almost zero percent, over at Citibank, which because of the same kinds of shoddy practices is more and more owned by oil sheiks, at least one person is happy.

Vikram Pandit is the Citigrouper grinning from ear to ear because even before taking the reins as CEO of the tottering bank he pocketed $216 million.

Almost Alex Rodriquez money, but A Rod a least has to put in ten years of work and hit more home runs than Babe Ruth and Barry Bonds before he pockets all of the money. Not true for Mr. Pandit.

He received $165.2 million as the result of Citigroup’s purchasing his former company as a way of luring him away, an additional $2.7 mil for the six months he served as head of Citigroup’s investment bank, and to top it all off was given a version of a signing-bonus of $48 million. If my arithmetic is correct, that totals a cool $216, give or take a hundred thou or so.

All this from a bank which saw its shares by 47 percent and needed to write off at least $20 billion in bad debts. But in spite of this, to them Pandit’s up-front money is chump change.

Ever sensitive to how this might look to the public, especially Citi shareholders and employees who have seen the value of their pensions plunge, Citigroup buried the details of its deal with Vikram Pandit in the fine print of a recent proxy statement.

Also not discussed was the leadership role Robert Rubin played in the effective undermining of Citibank’s value and standing in the banking community through a series of deeply flawed investment moves. The same Bob Rubin who has been given credit for the economic prosperity during the Clinton administration, the same Bob Rubin who has collected at least $200 million from Citigroup because of his board work, while more and more hiding from public view as his aura of omniscience evaporated. In the meantime, he didn’t turn back any of the money he received. (See NY Times article linked below.)

And here I all along naively thought that corporate America operated according to capitalistic principles—you are rewarded or punished because of what you place at risk. You venture capital, put in time and effort, and if your business is successful you cash in. If it doesn’t, you lose your investment.

What did Citigroup ask Mr. Pundit to place at risk? Or Robert Rubin, for that matter?

I’m shocked. This sounds more like socialism to me.