Rubin Deserts a Sinking Citi

Robert Rubin built the basis of his reputation, and his fortune, at Goldman Sachs (GS). He then went to work on the two in sequence: the former at Treasury, and the latter at Citigroup (C). It all worked out quite well for him, except for the way in which the $115 million (plus now-worthless options) he made at Citi managed to substantially detract from the reputation he so carefully built up in Washington.

Now, he's leaving Citi as the bank ponders selling off two of its crown jewels -- the bread-and-butter predictable income stream from the Smith Barney brokerage operation, and the hugely profitable and successful Banamex, which has a presence in Mexico that borders on the monopolistic.

Neither of the mooted buyers makes much sense to me. Smith Barney to Morgan Stanley (MS)? Didn't Stanley learn its lesson with the Dean Witter acquisition? And Banamex to JP Morgan (JPM)? I know there's an unspoken rule in financial journalism that JP Morgan always has to be top of any list of potential acquirers, but never, to my knowledge, has Jamie Dimon expressed the tiniest bit of interest in taking his Chase retail brand abroad.

Indeed, there's no obvious buyer for Banamex at all. Santander (STD) already owns one of Mexico's big three banks, so it can't buy another. HSBC (HBC) might be interested, but in general most banks are highly capital constrained right now and don't have the money to buy Banamex. More likely, in my view, would be a spin-off, with Manuel Medina-Mora taking Banamex public in what would certainly be the biggest Latin American IPO of the year.

The idea of selling these assets does imply to me that Citi is facing up to reality: realizing that it can't save itself through acquisition, as it briefly attempted to do when Wachovia went belly-up, it's shrinking down to a more manageable size.

I wonder how much time has been spent pondering the really radical option: pulling a Bank of New York (BK) and selling off the retail-banking operation. Citibank in the US is a large but dreary bank which has never been run particularly well at the retail level -- that's one reason why Citi's executives wanted to hand responsibility for it to the Wachovia executives in Charlotte. Now that's an asset which you could really get a bidding war going for.

Comments

[dixie:]

For what Rubin did in both government and at Citi, he should take a long walk off a short plank.

Jan 10 01:55 PM

[raising4dau...:]

Rubin is scum. They should push him out the corner office onto the ground below.

Jan 10 04:52 PM

[Smarty_Pants:]

Rubin and his contemporaries are probably going to be the last of his breed we see for a while. The collapsing financial sector won't be able to support the second step of the tried and true means to wealth in the District of Criminals:

1) Highly placed political sycophant
2) Overpaid corporate influence peddler.

With an anticipated gutting of the immense pay and stock option path to riches, the former bureaucrats will need to put in a lot more time peddling influence to highly placed former buddies in order to sock away the big money.

Jan 10 08:45 PM

[morph366:]

The headline to this article says that "Rubin deserts Citi" which suggests that he is leaving voluntarily. Somehow that doesn't quite sit right with the facts.

Jan 11 11:53 AM

[smartt:]

People like Rubin are absolute scum and bullies. To take no responsibility after collecting 150million plus and watching citi go down the tubes is unpardonable. Now that Citi has been sucked dry, he wants to go to a larger stage at the policy level.They need power or money , preferably both. People like him are the bane of USA. Millions of hardworking people feed these Leeches and feel powerless and helpless. Hopefully America returns to its roots of hard work, fair wages for a good days work and not such distorted pay packages. They should claw back prior salary and bonus based on Citi's dismal performance. Rubin is not alone. The list is endless . When this ends , USA will get back to its roots that made the country great

Jan 11 12:45 PM

[breckandy:]

Didn't Rubin and a few other folk sell off their stock several years a go?
While overrepresenting it's value.

Jan 11 05:53 PM

[kozanack:]

I agree with the point about Rubin slinking away, with pockets full. But looking at the biographies of Rubin and Vikram Pandit, my guess is that neither of them has the right skill set to lead Citi during this crisis. So someone ought to give Pandit a push, as well.

Jan 12 12:04 AM