The great reshuffling of deck chairs continues. Yesterday we reported on high level departures at Lehman. This afternoon Reuters is reporting that Antonio Cacorino, Citigroup’s co-head of global investor sales, is leaving the bank to “pursue new opportunities.” Reuters cites an internal memo they obtained (send it our way:tips@dealbreaker.com).

“Cacorino has been at Citi for 20 years, and is the latest multidecade veteran to leave the bank under Vikram Pandit, who became Citi’s chief executive late last year,” Reuters writes.

Citigroup sales co-head Cacorino to leave: memo [Reuters]

Earlier this week Citigroup chief executive Vikram Pandit summoned 60 executives to the megabank’s private country club in Armonk, N.Y. to present his plan to restore Citi’s lost luster.

We won’t bore you with the details of the plan. (But Eric Dash of the New York Times will do so, if you insist.) It’s mostly platitudes that seem unlikely to restore the lost morale of executives who’ve seen their fortunes plummet with Citi’s share price. The real problems with this plan begin before the details. They begin, in fact, with the title Pandit gave his plan—“The Rules Of The Road.”

What could be wrong with that?

Citigroup is still reeling from the subprime mortgage crisis and the credit crunch. Although newly minted chief executive Vikram Pandit has so far resisted calls to break up the financial behemoth, the bank is breaking-up anyway. It’s just doing it in bits and pieces.

Today Citigroup announced it is shuttering 32 branches of its Japanese lending unit, CFJ KK. It is also shutting down 540 unmanned automatic loan machines over the next 12 months. We have no idea what an “unmanned automatic loan machine” might be but it sounds like a very bad idea. And, on the other side of the original Axis of evil, Citigroup is reportedly hoping to quickly sellits German consumer-banking unit Citibank Privatkunden AG.

Oh, and they’re also pulling out of the UK mortgage market. Today Egg, an internet-only bank owned by Citigroup, said it is pulling out of the UK mortgage market from today. And, most recently, Reuters is reporting that Citi received the first round of bids for its $7 billion Primerica Financial Services, the group that handles insurance and mutual fund sales.

The power of federal prosecutors is on gruesome display in the latest issue of Fortune, which chronicles the story of former Citigroup commodities trader Craig Gile who found himself jailed for allegedly cooking the books at his trading desk. The strongest evidence against him is that he seems to have corrected some reports that overstated the value of his desk’s assets, which prosecutors construed as evidence of knowledge that his desk was engaged in chicanery. First Citigroup flipped on him and then his immediate supervisor. With the odds stacked against him, Gile (whose name is unfortunately pronounced like “guile”) pleaded guilty and was sentenced to a year in federal prison.

The prosecutors seem to have been motivated more by the urge to set an example for others than by the gravity of Gile’s alleged wrong-doing. Here’s how Fortune describes the situation:

[W]hen it comes to Wall Street, in the absence of clear rules and a lack of close regulatory supervision, the thinking among prosecutors and judges seems to be that the aggressive pursuit of a select few will be a deterrent to thousands of other traders who might be similarly tempted. Jonathan Streeter, the assistant U.S. attorney who handled the case, said he couldn’t comment. However, an attorney who formerly worked in the Southern District says there are very stringent rules in the office about how far a prosecutor can bend to show leniency to a defendant. “Once that train gets on that track,” says Chauvin, “it is almost impossible to derail.”

What was it that prompted JP Morgan cheif Jamie Dimon to call Citigroup’s Vikram Pandit a jerk? Apparently Pandit was asking how the deal to buy Bear Stearns would affect the risk to Bear’s trading partners on certain long-term contracts. This was a crucial issue because many of Bear’s counter-parties had been unwinding contracts for fear the investment bank might collapse. As part of the deal, JP Morgan had put in place a durable guarantee that it hoped send a very strong signal that would stop the run on Bear.

But for some reason the Pandit’s question irked Mr. Dimon. “Stop being such a jerk,” he told Pandit. A little over a week later, JP Morgan would attempt to get out of the guarantee and unnamed sources started saying that JP Morgan never meant to enter into it to begin with.

Probably our favorite part of yesterday’s final installment of the Wall Street Journal’s three-part series on the destruction of Bear Stearns is an exchange that takes place between JP Morgan Chase CEO Jamie Dimon and Citigroup CEO Vikram Pandit.

As you probably know, Dimon was the heir apparent to ascend to the top of Citigroup after serving for years as the right-hand man of banking empire building Sandy Weil. At the last moment, however, he was forced out of the bank and the top spot was handed to Citigroup’s lawyer. Fast forward a few years and Dimon gets to run Citigroup’s rival, JP Morgan, and that uppity lawyer is forced to resign in disgrace. Pandit is summoned up to take over Citi.

And, after the jump, here’s Dimon hazing the new kid on the Wall Street CEO block.

Bloomberg new has gone especially gloomy lately. On Tuesday it was the really, really long expose on counterparty risk in credit default swaps. Today Mark Pittman follows up on variable interest entities, the ugly step child of the off-balance sheet special purpose vehicles that Enron made infamous.

We wrote about these way back in February, when people were first waking up to the fact that banks had undisclosed exposure to mortgage backed securities held by VIEs. Now lawmakers, regulators and accounting standards people are considering rules that would prevent off-balance-sheet treatment for VIEs.

Bloomberg highlights one short-lived VIE with a particularly unfortunate name. Launched by Citigroup just as the mortgage market was collapsing, the $2.5 billion entity known as Bonifacius Ltd was loaded up with subprime mortgages. Six months later it was dead. Bonifacius, as our readers with classics degrees undoubtedly know, was named called “the last of the Romans” by historian Edward Gibbon, author of The Decline And Fall Of The Roman Empire. Bonifacius “fought and died for a fading empire.”

Citigroup’s `Last Roman’ CDO Shows Enron Accounting [Bloomberg]

Citigroup might want to rethink its insomniac slogan. Although the “Citi Never Sleeps” slogan is meant to convey a sense of never-ending vigilance, a new study shows that sleep deprivation leads to a loss of attentiveness and interferes with visual processing.

The study, which will be published in the Journal of Neuroscience, shows that losing only one night’s sleep has a dramatic effect on the brain, making it prone to short, sudden shutdowns. The study suggests that sleep-deprived people alternate between periods of near-normal brain function and dramatic lapses in attention and visual processing.

“It’s as though it is both asleep and awake and they are switching between each other very rapidly,” said David Dinges of the University of Pennsylvania School of Medicine. “Imagine you are sitting in a room watching a movie with the lights on. In a stable brain, the lights stay on all the time. In a sleepy brain, the lights suddenly go off.”

Losing just one night’s sleep makes brain prone to ‘sudden shutdowns’ [Evening Standard]

The $13.25 billion acquisition of Electronic Data Systems by Hewlett-Packard—the ninth largest tech deal ever, according to DealLogic—has moved the M&A league table standings, DealJournal Heidi Moore reports. Before the deal was announced, Goldman Sachs and Morgan Stanley led this year’s ranking from advising technology companies on mergers. But neither bank has a role in the H-P deal, pushing them down in the rankings

“Goldman ranked first with $14 billion of announced deals to its credit this year, and Morgan Stanley ranked second with $11 billion according to investment-banking research provider Dealogic,” Moore writes. “But now, Goldman is in third place, displaced by Lehman Brothers and J.P. Morgan. Lehman has jumped from fifth to first place with $17 billion of deals to its credit, while J.P. Morgan — which, just yesterday, languished in seventh place with only about $2.2 billion of tech deals to its credit — has vaulted to second place in the rankings from seventh place. Morgan Stanley has fallen to No. 5.”

Citigroup and Evercore Partners advised Electronic Data on the deal. J.P. Morgan Chase and Lehman Brothers advised Hewlett-Packard.

Hewlett-Packard: The Advisers [Deal Journal]

Today at Citigroup, in accordance with Vikram’s promise to shareholders that the company will begin taking steps toward realizing the enormous potential of the C, a member of the fixed income group was paid 3 grand to execute “the reverse bowl cut,” according to sources. To claim the money, he must sport the haircut proudly on the trading floor for a full calendar week. We’re told the money is being donated to charity.

Pictures after the jump.

To hear the heads of Wall Street’s largest financial institutions speak, the worst of times are behind us. But a new wave of pressure seems mounting as corporate borrowers get squeezed by tightening credit and a slowing economy. High yield bond defaults are up and going higher as companies find lenders unwilling to refinance risky loans (non-investment grade lending is down 70% this year). And now companies have begun drawing down on their revolving lines of credit, sucking even more capital away from Wall Street, the New York Times is reporting.

Those of you not involved in corporate finance might not appreciate how much banks hate when borrowers draw down on revolving lines of credit. Typically a corporate borrower will have a revolver built into its larger credit facility. But unlike bond issuances and syndicated term loans, banks cannot easily hand the credit risk and capital requirements onto other investors. In short, when borrowers draw down revolvers that money comes out of Wall Street’s coffers.

Banks are already under tremendous balance sheet pressure following the $300 billion write-downs and credit losses over the past year, and the threat of corporations drawing down their revolvers could exacerbate the situation. The New York Times, in a somewhat panicky tone, notes that in a worst case scenario of massive revolver draws, banks could be forced to sell assets or raise money to cover the loans.

The banks are downplaying the risk, of course. “Even in the most volatile markets, including last summer, we have seen very few companies draw down their revolvers,” Chad Leat, chairman of the alternative asset group at Citigroup, tells the Times. “Occasions when it did happen have been unique.”

We find this completely reassuring. Banks, especially Citigroup, have proven so effective at anticipating crises in the past year that we wouldn’t even dream of doubting Chad.

Banks Fear Increased Demand for Corporate Emergency Loans [New York Times]

When we learned this morning that Citi CEO Vikram Pandit had announced at 5:03 this morning that the financial giant was adopting “Citi Never Sleeps” as its new company motto, we immediately began anticipating the new advertising campaign that Citi will doubtlessly unveil.

And then we decided we couldn’t wait for Citi. Pandit’s got a lot on his mind, and the bank is strapped for capital. Why not devise an advertisement for the bank? You know, just to help out. Of course, we may understand the concept of eternal insomnia slightly different from Citi, which imagines that ‘Citi Never Sleeps’ conveys the image of a bank with “boundless energy to serve customers.”

Our Citi ad after the jump.

Just yesterday we were learning that Vikram Pandit was concentrated on the small things rather than vision. But in the wee hours of the morning he sent out an email showing that he’s totally changed his mind. Now he’s on to real big things—like company slogans!

At Citi, insomnia isn’t just a chronic problem for bankers worried about losing money or losing their jobs anymore. As Bess Levin reported this morning, it’s the financial giant’s new company slogan: “Citi Never Sleeps.”

Never sleeping is a sure sign of insomnia, which is itself usually a symptom of stress. It can have some seriously deleterious consequences, some of which might not be endearing to Citi’s shareholders or customers. Insomniacs suffer from poor concentration and focus, difficulty with memory, and impaired social interaction.

Which actually sounds a lot like the Citi we all know so well. At least Pandit’s being honest with the public about Citi’s desperate condition.

Our eyes tend to start reading when we hear a business leader start talking about “vision.” It’s a term that has been over-used to the point where it is all-but meaningless. The little wall-hanging plaque describing your corporate vision belongs in the circular file with your mission statement. So it was a bit of relief when we read in this morning’s Wall Street Journal that Citi chief executive Vikram Pandit isn’t too big on the vision thing.

Asked about his vision for the company, Mr. Pandit says first it needs to fix the little things. “Only after we get those foundations right do we earn the right to talk about vision,” he says.

And yet there’s something unsettling about too much resistance to vision. We can’t help but recall how badly things worked out for President George Bush (the first one!) who famously admitted he lacked the vision thing. Pandit had to expect that Journal reporter David Enrich would ask him about his vision because the allegation that Pandit lacks a vision for Citi has been one of the loudest and most frequently heard complaints about his leadership. This version of “God is in the details” must be understood as a prepared-in-advance response.

Which makes it all the more striking how underwhelming it is. We see what he’s trying to do—flip the question on the questioner to say “that’s the wrong question, novice”—but it’s so understated that it doesn’t really work. It leaves us wondering whether Pandit too resistant to formulating a vision of what sort of financial institution Citi should be in the post-Sandy Weill, post-Chuck Prince era. Is Pandit willfully blind?

Felix Salmon thinks he’s behaving too much like a chief operating officer and not enough like the chief executive. “Pandit doesn’t think he has the right to talk about vision? Pandit has the obligation to talk about vision. That’s the CEO’s job,” he writes. “Right now he’s behaving much more like a COO than a CEO, and that needs to change.”

Vikram Pandit, COO of Citigroup [Portfolio]

Citigroup, fighting to keep its title as one of Wall Street’s most innovative investment banks when it comes to demoralizing employees, has begun charging lower-level employees to use the investment bank’s box seats at sporting events, the Wall Street Journal’s David Enrich is reporting. Top executives, of course, still get to enjoy the perk gratis.

Does anyone know how much Citi charges for box seats? Are they offered at cost? Or does Citi at least offer some kind of discount to those beleaguered junior bankers who have somehow survived the 30,000 deep cuts off Citi has already made or is planning to make? Also, does buying the seats automatically move you toward the bottom 5% of the bank that chief executive Vikram Pandit has promised to fire every year? After all, if you have time to seat in the box seats, you obviously aren’t working hard enough.

Citigroup’s Pandit Faces Test As Pressure on Bank Grows [Wall Street Journal]

Citigroup goes to trial in New Jersey today to defend itself against a law suit claiming it helped Parmalat in the accounting fraud that eventually led to the Italian dairy company’s collapse. We’ve never managed to get our heads around exactly what Citi is alleged to have done. The plaintiffs lawyers claim Citi knew the company was in trouble but kept lending it money through complicated structured finance deals that allowed Parmalat to temporary conceal its troubles. But Citi lost millions when the company collapsed. That sounds more like incompetence than fraud.

Adding to our suspicions that incompetence was at work here is the report from Breakingviews.com this morning that Citi called the structured finance vehicle “buconero.” That apparently translates as “black hole” in Italian. Great work fellas.

At least it wasn’t Dr. Evil [Breaking Views; subscription required.]

As keepers and dispensers of business wisdom, people often ask us to explain certain mysterious aspects of the world of finance to them that they cannot explain to themselves. Since we think on a higher plane about this stuff than most, it’s generally helpful to use a pop culture analogy to elucidate. Don’t think of this as us dumbing down the material for your benefit, but merely-actually, that’s exactly what it is. But what I’m saying is, don’t feel bad about it. In fact, today’s question comes from a dear reader who embraces his own limitations, and asks us to answer his thorny question in a way that any simpleton can understand. “Steve in Stamford” writes, “My favorite memories from childhood involve ‘sick days’ from school, where I would sit in front of the tube eating Tasti Cakes and watching reruns of ‘Beverly Hillbillies,’ ‘That’s My Mama,’ ‘Flintstones’ and the Hulk. The lessons gleaned have informed my investment decisions later in life. Lately, I’ve been at a loss on Citi — I don’t get it. Any insights to be drawn from TV Land?”

Great question, Steve, and topical, too. On Tuesday, Sameer Al-Ansari, the head of Dubai International Capital said at a private equity conference, “In my view it will take a lot more than that to rescue Citi and other financial institutions.” This was sort of a “no shit” statement that pointed out something every 2-brain celled human being’s been thinking since Meredith Whitney told him/her to back in October but apparently it knocked some sense into the 1-brain cell guys, who still saw some value in C, and the courage to short that shit—resulting in a four percent drop in Citi’s stock price. Then, today, Dubai International said in a statement, “Dubai International Capital has never expressed an opinion on the investment merits or financial condition of Citi.” That’s right, Steve—it was all in your head. Am I saying Citi’s largest shareholder outright lied to you? No, they’re not smart enough for that. What we’re saying is, they have no idea what’s going on. Which brings us to this—Citi, and its ragtag coterie of hangers-on, is the TV equivalent of the seminal sitcom, “Hogan’s Heroes.”

Think about it, Steve: the premise of the show was that the POWs at Stalag 13 were actually active participants, using the camp as a base of operations for sabotage against the Nazis. Their leader was senior ranking POW officer Colonel Hogan. The prisoners were in contact with Allied command, and running the show, aided by the incompetence of camp commandant Colonel Klink and his aide, Sergeant Schultz. Citi is the Third Reich. The failed experiment. Weill would be Hitler but he flew the coop with Eva Braun, and let Pandit do the whole “Third Act in the Bunker” thing. Meredith Whitney is Hogan. Alaweed is Klink. Dubai International is Schultz— “I zhee nothing.” We almost said Pandit is Schultz, but that would be giving him too much credit.

That’s really it. Hope this helped, Steve. If you have a question you’d like answered, shoot us an email at tips at dealbreaker dot com, or give us a call at (203) 890-2000. We know what we’re talking about.

Dubai International Says It Takes Back Citi Comments [DealBook]

It’s not just the heads of giant Persian Gulf funds who are trash-talking each other’s favorite banks, the chief executives of rival institutions are getting into the mix too. In a meeting with a group of Wall Street analysts recently, Merrill Lynch chief executive John Thain said that he believes that Citigroup will need another large capital injection.

His words were echoed today at a private equity conference in Dubai, where the top man of Dubai International Capital, Sammer al-Ansari, was asked about the billions of invested in Citigroup by rival sovereign wealth funds and Prince Walid bin Talal. “It’s going to take more than that to rescue Citi,” he said.

Thain did not go into specifics about the financial condition of Citi but his words struck a chord with those at the meeting. Today news reports say that analysts at Merrill Lynch have reduced their full-year earnings forecast for Citigroup and projected that the bank could book another write-down of debt tied to souring mortgages. But hearing the words from Thain himself had a powerful effect on those present. If Wall Street’s ultimate insiders are this negative on the prospects of their rivals, perhaps the downturn on Wall Street could be even worse than expected.

Both Merrill Lynch and Citi have suffered badly from the financial market turmoil that began last year. Merrill has written down $24.5 billion in losses, while Citigroup has recorded $22.4 billion in losses.

So who is on this list of 14 companies under investigation by the FBI for their involvement in the subprime mortgage crisis? The FBI apparently intends to keep us in suspense because they won’t give details. All we know is that they are looking into “allegations of fraud at various stages of the mortgage process, from companies that bundled the loans into securities to the banks that ended up holding them.”

So let’s recklessly speculate. Two companies that are sure to be on the list are Bear Stearns—which is already under investigation by federal prosecutors and the SEC—and Countrywide, which is both the biggest home loan lender and also facing an SEC inquiry. Goldman Sachs is very likely on the list. It was accused on the pages of the Sunday New York Times of misleading clients by packaging CDOs while shorting the mortgage market. We know that at least one Senator read the article and has been making a stink, and we know that federal investigators often get their leads by reading the paper. What’s more, Goldman Sachs has said that it is cooperating with an unnamed government agency.

Morgan Stanley has also admitted to cooperating with unnamed government authorities. At first, everyone assumed this was the SEC. But why wouldn’t they come out and say that? More likely they declined to name the agency out of fear that saying they were cooperating with the FBI would tar them with serious criminality—rather than the everyday Wall Street shenanigans implied by an SEC investigation.

So that gives us four good leads. Who else is a cylon on the list? No doubt some additional mortgage companies and some home builders. Maybe the ratings agencies are also. Leave your guesses in the comments section below.

FBI Launches Subprime Probe [Wall Street Journal]

High ranking sources at Citigroup tell belated-birthday boy Charlie Gasparino that CEO Vikram Pandit is in favor of keeping the comically overweight bank large and in charge (the exact phrasing was “Jiminy Glick-esque”). This is crazy and maybe worthy of a siren because no one at Citigroup has ever expressed resistance regarding breaking up the big C. This is completely new and radical. This is such a drastic change in ideology from the last couple of Citigroup CEO’s that CNBC insiders say Charlie’s been wearing one of those foam neck braces to deal with the ensuing whiplash, though that probably has less to do with shock vis-a-vis Citi and more to do with trying to make a killing at his small claims court appearance later this afternoon, when he’ll argue that “that guy came out of nowhere and rear ended me and I’m not leaving without my fucking money.”