It was a teary goodbye today, as Citigroup bade farewell to its internal hedge fund unit, Citi Capital Advisors, redubbed Napier Park Global Capital. And why wouldn’t parting be such sweet sorrow for the men and women who Citi literally gave the business away to, gratis? Read more »
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:firstname.lastname@example.org).
“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.”
Trader, father, veteran, convict [Fortune]
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]