Time for FDIC to Back Off Citi 10 comments
Daniel Harrison
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Federal Deposit Insurance Corporation (FDIC) chairman Sheila Bair got a well-deserved kick in the teeth this week when consultant Egon Zehnder International endorsed Citigroup’s chief executive Vikram Pandit. According to people who claim to have read the report, Pandit received “a positive assessment” by Egon Zehnder in the independent review which banks on TARP aid are required to undergo.
Bair has been one of Pandit’s most furious and public critics so far this year. Her feuding came to a head in June, when it was reported that Bair pressed regulators to lower the government’s health ranking of Citigroup (C). The move was aimed at giving the FDIC more control of the bank, so that it could meddle in a top-management shake-up, of which Pandit would be the first casualty, according to sources. Bair’s views were not shared by other regulatory officials, however.
The consultant’s review, which criticized three other top managers, has drawn a skeptical response from FDIC officials:
People familiar with the situation said the FDIC signed off on Citigroup’s selection of Egon Zehnder to conduct the management review. FDIC officials vetoed a consulting firm that the bank initially proposed for the job. After vetoing the consulting firm favored by Citi, FDIC officials sent Citi “a list of approved firms acceptable to them,” and one was Egon Zehnder, one informed individual said.
Now, though, some FDIC officials are skeptical of the findings. One person close to the agency described the outside report as “a total whitewashing.” Some agency officials also are having second thoughts about the qualifications of Egon Zehnder, which largely runs executive searches for clients.
It’s no secret that I’m a fan of Vikram Pandit and agree with Egon Zehnder’s conclusion that the brunt of Citi’s woes are more likely caused by the failure of the bank’s administrative and financial controllers than they are by the top man. I wrote as much in August, when it was revealed that hedge fund manager John Paulson had been accumulating the firm’s stock.
But in this case, it is clear that the FDIC’s response is simply childish, more aimed at saving its own face than in attempting to find constructive solutions to re-building one of the nation’s largest financial institutions. Back in June, New York Magazine’s Jessica Pressler put Bair’s faulty conclusions into some pretty succinct prose:
We’re sorry, but this is just wrong. First of all, we’ve said it before and we’ll say it again: Citigroup’s problems are not Vikram Pandit’s fault. And, awkward Zen garden moments aside, he’s done a pretty effective job in the last six months. Citigroup performed well in the stress test, unloaded one of its most profitable units, and has exhibited an almost pathetic willingness to do whatever the government wants. Has the company moved too slow? Maybe, but it’s been six months. Certainly this is not reason enough for a federal coup, especially when there are bigger companies with bigger problems that need tending to.
In fact, labeling the consultants’ report a “whitewash,” as the FDIC has done, merely shows how many of Pandit’s achievements the regulator is willing to ignore in order to protect Queen Sheila. Pandit has disposed of Smith Barney, an organizational mis-fit, for a healthy sum back when there was scarce capital around in the banking industry, bolstered emerging country market share at a pace which makes many rivals envious, and hired some of the best traders and managers around in London and New York. It’s hard to see how Bank of America (BAC), which gets much less flack from Bair and her bureaucratic gang, has managed to accomplish any of these feats so far in 2009.
Ongoing tensions between regulators and managers never produce satisfactory long term results. When they arise, it’s either the job of the firm to change its management structure, or for the regulator to apologize and admit that it was wrong. In this case, it would be encouraging to see the FDIC show that it has the business intelligence among its staff to do the right thing.
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Its time for sheila Bair to resign and go to work as a low level analyst and learn from somebody else how to regulate banks to preserve shareholder and gov't interest. She is one person that could have curbed the high levels of bank leverage by establish capital ratios to insure that banks would be able to absorb losses and restrict lending.
She now stands like a deer caught in the headlights trying to fiquire out how to raise capital for the bankrupt FDIC.
Did you know that FDIC signed loss sharing agreements in bank sales that ended up expediting foreclosure?
Yep, the champion of keeping people in their homes were actually helping kick people out of their homes?
"So, you ask...Why does this program hurt short sales? Because, our brilliant government offers this SAME PROGRAM FOR FORECLOSURES! The only difference is, the government picks up 80% of the tab on all of the extra costs associated with a foreclosure (BPO's, upkeep, utilities/maintenance, legal fees, etc.)
So, If I'm OneWest, why would I want to waste my time negotiating through a Short Sale, when I can make the same amount of money (if not more) by just letting it go to foreclosure? And we wonder why nobody can get a Loan Modification? Why would OneWest approve a loan modification for this guy, when they can foreclose and make over $100k? And, to add injury to insult, they have held this loan for 6 months! Not a bad ROI, huh?
What infuriates me the most is that in my particular case mentioned above, they have the guts to hold my client hostage for a $75k promissory note, after they are already making more than $100k on the sale!!! This is his primary residence, 1st Position loan, and OneWest has NO RECOURSE! Imagine if they could make $100k, then get a deficiency judgement! Talk about making some big bucks!
Can you say "GREED"?
The scary thing is that over 50 banks have Shared Loss Agreements in place with the FDIC. Some of them include: Bank of America (go figure), CitiMortgage, Wells Fargo, etc.
This entire agreement between the FDIC and OneWest can be found here, on the FDIC website. It's all there, for the world to see! They have it all layed out. All of the formulas, worksheets, etc. "
activerain.com/blogsvi...-
*imho*
On Oct 09 03:07 PM tommiegun wrote:
> Sheila Bair has allowed bank leverage ratios to go through the roof
> during her 3 years at the FDIC. She did nothing to abate excessive
> risk levels; she was given a job by president Bush that she has not
> been able to do. ""She is totally incompetent"".
>
> Its time for sheila Bair to resign and go to work as a low level
> analyst and learn from somebody else how to regulate banks to preserve
> shareholder and gov't interest. She is one person that could have
> curbed the high levels of bank leverage by establish capital ratios
> to insure that banks would be able to absorb losses and restrict
> lending.
>
> She now stands like a deer caught in the headlights trying to fiquire
> out how to raise capital for the bankrupt FDIC.
Since FDIC is funded by the banks, how about the banks demand that EZI conduct an assessment of the management skills of Sheila Bair & co.?
I must say, such a report is long overdue, should be mandatory, and would serve the public interest enormously.
On Oct 10 10:06 AM Angry Banker wrote:
> Good article. In fact FDIC rejected Citi's first choice for an external
> firm to conduct this review, then endorsed Egon Zehnder International.
> But once EZI gave Pandit good marks, FDIC has criticised their report.
> Amazing.
>
> Since FDIC is funded by the banks, how about the banks demand that
> EZI conduct an assessment of the management skills of Sheila Bair
> & co.?
-Pandit lost Wachovia and ultimately Smith Barney because he is not a seasoned leader. Wells Fargo outfoxed Citi in that deal.
-Pandit turned down an opportunity to acquire Goldman Sachs. Again, Pandit failed to see the big picture, and turned down that opportunity.
-Citi sold 51% of Smith Barney to the much smaller Morgan Stanley, which has zero experience running a large brokerage firm. The deal is marketed as a joint venture, but Morgan will ultimately own Smith Barney. Pandit's sale of Smith Barney to Morgan Stanley jeopardizes clients, because Morgan does not have the depth or expertise that Citi has, nor do they have a bank. Morgan also lags in client service, and technology as well. In two years, when the platform is built, and the overconfident Morgan Stanley tries to run a business it never has, I would guess clients will run for the exits. Thus, smaller regional firms should prepare for that day.
-Citi cannot repay TARP. If Pandit were the leader everyone says he is, Citi would be able to repay that investment. I wonder...when Citi will sell Citibank, since anyone can see that slowly, the Feds are dismantling Citi. First, Smith Barney, then Phibro...and these are profitable, and meaningful to the bottomline. Ultimately, Citi will be parceled off, Morgan will fail with Smith Barney, maybe not right away, but over time, and the Feds may ask, "why didn't we just let them fail in the first place?"
Indeed. Why not?
I also agree with you that Sheila Blair being so biased without any substantial reason, being head of FDIC and a public official, is in itself a sign of her incompetency. Whatever she is doing is a personal vendetta and not in the common good. That makes her unfit for the job. She must be replaced.
On Oct 09 03:07 PM tommiegun wrote:
> Sheila Bair has allowed bank leverage ratios to go through the roof
> during her 3 years at the FDIC. She did nothing to abate excessive
> risk levels; she was given a job by president Bush that she has not
> been able to do. ""She is totally incompetent"".
>
> Its time for sheila Bair to resign and go to work as a low level
> analyst and learn from somebody else how to regulate banks to preserve
> shareholder and gov't interest. She is one person that could have
> curbed the high levels of bank leverage by establish capital ratios
> to insure that banks would be able to absorb losses and restrict
> lending.
>
> She now stands like a deer caught in the headlights trying to fiquire
> out how to raise capital for the bankrupt FDIC.
On Oct 10 03:09 PM Fourpenny Guy wrote:
> We are a society that seems to like the least experienced individuals
> in positions of power. Palin and Pandit are two examples. Citi fans
> will say that Pandit inherited Citi's problems. However, Pandit has
> no CEO experience, or the rolodex that a Clinton or Kennedy would
> have. As a result:
>
> -Pandit lost Wachovia and ultimately Smith Barney because he is not
> a seasoned leader. Wells Fargo outfoxed Citi in that deal.
>
> -Pandit turned down an opportunity to acquire Goldman Sachs. Again,
> Pandit failed to see the big picture, and turned down that opportunity.
>
>
> -Citi sold 51% of Smith Barney to the much smaller Morgan Stanley,
> which has zero experience running a large brokerage firm. The deal
> is marketed as a joint venture, but Morgan will ultimately own Smith
> Barney. Pandit's sale of Smith Barney to Morgan Stanley jeopardizes
> clients, because Morgan does not have the depth or expertise that
> Citi has, nor do they have a bank. Morgan also lags in client service,
> and technology as well. In two years, when the platform is built,
> and the overconfident Morgan Stanley tries to run a business it never
> has, I would guess clients will run for the exits. Thus, smaller
> regional firms should prepare for that day.
>
> -Citi cannot repay TARP. If Pandit were the leader everyone says
> he is, Citi would be able to repay that investment. I wonder...when
> Citi will sell Citibank, since anyone can see that slowly, the Feds
> are dismantling Citi. First, Smith Barney, then Phibro...and these
> are profitable, and meaningful to the bottomline. Ultimately, Citi
> will be parceled off, Morgan will fail with Smith Barney, maybe not
> right away, but over time, and the Feds may ask, "why didn't we just
> let them fail in the first place?"
>
> Indeed. Why not?
On Oct 10 03:09 PM Fourpenny Guy wrote:
> We are a society that seems to like the least experienced individuals
> in positions of power. Palin and Pandit are two examples. Citi fans
> will say that Pandit inherited Citi's problems. However, Pandit has
> no CEO experience, or the rolodex that a Clinton or Kennedy would
> have. As a result:
>
> -Pandit lost Wachovia and ultimately Smith Barney because he is not
> a seasoned leader. Wells Fargo outfoxed Citi in that deal.
>
> -Pandit turned down an opportunity to acquire Goldman Sachs. Again,
> Pandit failed to see the big picture, and turned down that opportunity.
>
>
> -Citi sold 51% of Smith Barney to the much smaller Morgan Stanley,
> which has zero experience running a large brokerage firm. The deal
> is marketed as a joint venture, but Morgan will ultimately own Smith
> Barney. Pandit's sale of Smith Barney to Morgan Stanley jeopardizes
> clients, because Morgan does not have the depth or expertise that
> Citi has, nor do they have a bank. Morgan also lags in client service,
> and technology as well. In two years, when the platform is built,
> and the overconfident Morgan Stanley tries to run a business it never
> has, I would guess clients will run for the exits. Thus, smaller
> regional firms should prepare for that day.
>
> -Citi cannot repay TARP. If Pandit were the leader everyone says
> he is, Citi would be able to repay that investment. I wonder...when
> Citi will sell Citibank, since anyone can see that slowly, the Feds
> are dismantling Citi. First, Smith Barney, then Phibro...and these
> are profitable, and meaningful to the bottomline. Ultimately, Citi
> will be parceled off, Morgan will fail with Smith Barney, maybe not
> right away, but over time, and the Feds may ask, "why didn't we just
> let them fail in the first place?"
>
> Indeed. Why not?
Between Blair & Pandit - a pox on both of them! Our country is in the hands of corporate shills and corrupt pols. I doubt either of B or P have commited any illegal acts, but with all of the corruption and pork barrel earmarks, AIG funds conduit to GS, and the rest of the crap effected by both administrations. Both GWB and BHO have and continue to lead administrations that serve only the top 1% at the expense of the middle class, and leave the welfare class on the government plantation.
Throw all the bums out of office -
Term limits for Congress,
One in Washington,
One in Prison!
www.thenational912proj.../
www.rollingstone.com/p...
www.kickthemallout.com...