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."

So this is the much vaunted kitchen sink? Citigroup took a $18.1 billion write-down in sub-prime related assets. But as they just discussed on the conference call, Citi still had $37.3 billion in direct and indirect subprime exposure at the end of the quarter. That's still a lot of risk on in asset classes that no-one can confidently value. Even Citigroup admits that it is just looking at the ABX and making intelligent guesses.

If we're following this correctly, Citi began the quarter with $55 billion in exposure to subprime and ended with $37 billion. A huge chunk of the $55 billion was in CDOs, which the company had valued around$42.9 billion. It sold $800 million (although it's not clear what the discount against book was) and wrote-down a whopping $14.3 billion. Our high level quant skills tell us this leaves Citi with $29.3 billion in CDO exposure. That's not quite the coming clean balance sheet the bulls were talking about yesterday.

What's worse, Citi's chief financial officer is stressing that there is no market against which to mark these asset backed CDOs. So these write downs are just mark-to-model. Educated guesses by the folks whose educated guesses got us into this mess in the first place.

You can already hear the people who got long on Citi yesterday running for the doors.

Update: Well, that call did not end pretty. There was a lot of talk about how the Citi team needed to impress investors by putting forth a new plan for the future and demonstrating they have a clear grasp of the risks faced by firm, particularly in the credit markets. The Q&A portion of the conference call pretty much did the opposite, with the chief financial officer having to admit many times that he either wouldn't comment or didn't know the answer to detailed questions about credit market exposure. Merrill's Guy Moskowski asked about what the original par value of the CDO portfolio. Crittenden said he didn't know. How about specifics on modeling versus market tests? Nope, just more hand-waving. Bess Levin favorite Meredith Whitney asks about CDO valuations and Crittenden declines to confirm her estimates. Ron Mandel asks about the ABX but Critter doesn't have the answer to that either. I guess we can give him Socratic credit for knowing what he doesn't know. And at least Pandit didn't end it by saying, "Let's get the fuck out of here."

So much exciting stuff going down at Citi this week. Charlie “No Sleeves” Gasparino reports that on Tuesday, the bank will unveil its genius plan to write-off $24 billion and lay off 20,000 employees. Some might even be canned as early as this afternoon. Do you sense you might be in that enviable position of no longer having to tell people you work at Citigroup? Got any idea what the severance might be like? Let us know. Thinking about choreographing some sort of performance piece in reaction to the news? Let us know. Considering that China made the first in a three-part series of phone calls over the weekend to say it doesn’t want to be seen with Citi (Bear Stearns, sure, no prob), capital that Pandit was apparently banking on in order to keep layoffs “to a minimum,” you should probably all be coming up with something. Prince Alwaleed, who is less invested in Citi for the money than for the hilarity of it all, is expected to hand over a few unmarked twenties to keep things cool, though insiders say that with the mood he’s in RE: the Loverboy/Foreigner/Night Ranger tour being cancelled, nothing is certain. (If you listen carefully, you can here a Saudi accent in the background vocals for Sister Christian. Very crisp "t" pronunciation.)

On the bright side, Citi has given us a datapoint in the "write down per employee" value that reigns on the street 1,200,000 per employee, apparently). Now you can calculate J.P. Morgan and UBS layoffs as easy as a few HP-12C keypresses. That, my friends, is news you can use.

Citi Could Write Down Up to $24 Billion [CNBC]
China's Government Could Hamper Citigroup's Plans to Raise Capital [WSJ]

For now, however, I’m going to ignore what is obviously the result of Vikram Pandit paying a house call to the Mayo residence over the holiday and focus on the billions. Last week Goldman Sachs analyst William Tanona said $18.7 billion, the other day Sanford Bernstein’s Howard Mason wrote $12 billion. Meredith Whitney is rumored to be working on a report that pegs it at more like $35 billion, but who really knows. This is all just hearsay and speculation. And I’ll just leave it at that (if you have anything to add, by all means, go ahead). As an aside, I went with the 8830. I’m happy with it so far, mostly because it’s really brought my otherwise dormant asshole tendencies to light (for instance, the tongue lashing I gave a friend yesterday for interrupting me during a game of BB when I only had one life left and before I could pause the thing). I’ll elaborate more on that later.

Citigroup may write down $12 billion [Reuters]

CNBC reports that Citigroup will begin its layoffs next week, ultimately cutting 5 to 10 percent of its 320,000 employees (and then 5 to 10 percent of what remains, and then another 5 to 10 percent after that). This is sort of sad because when you look at that jolly, elfin face of Vikram Pandit's, you don't think "bad cop," you think "Christmas in Bombay" ("over-hyped, highly-mediocre hedge fund," etc.). In other news, it says here that I could take 17 five year olds in a fight, though I think my score was so high because I said that if it came to it, I wouldn't have a problem biting or eye-gouging, which is really only half true. I have issues with sticking things in my eyes- took like a week to master contacts, and drops, etc. flat out don't happen-, so I’m guessing I probably wouldn't be up to the task of sticking things in other people's. Biting, yes, no problem. I would bite the shit out of those 5 year olds. I’ve already bit three five year olds this morning. I'll elaborate more on that later.

Earlier: Layoffs Watch '08: Citigroup

Citigroup Layoffs Could Start Next Week [CNBC]

Specifically today, and apparently “almost everyone” in New York, which we’re told means more than forty. At this time I would like to offer our condolences to the recent unemployed, but move that we use this opportunity to recall that yesterday, I said we needed to get more creative with how people are getting fired. I came up with a few out of the box ideas (“A game of Assassin,” “turn off all the lights for five minutes and let everyone slap whoever they can at will/random. When the lights come on, the people with the reddest faces should be fired,” “something having to do with a lethal strain of syphilis (the rule is it can't be treated)”), then asked you to come up with your own. No one did and today, those poor kids at Citi were probably brought into some random conference room and told how valuable they are but at this time don’t fit into the bottom line blah blah blah while a chick from HR passed out tissues. Who do they have to thank for that run of the mill, nothing special send off? You. And now you have to live with that.

But! There are so many more layoffs to come, and not just at Citi. What I’m saying is, if you don’t want next week's or next month's lame-ass, “you're a valuable asset to the team but management is restructuring the amount of retards they have working for them*” firings on your conscience, get off your asses and do something.

Earlier: Layoffs Watch '08: Citigroup

If We're Going To Do This, Why Not Have Some Fun With It?

*actually, that’s quite good, though unlikely, except at Bear, where they have no regard for the mentally disabled.

Don Callahan, best bud with new Citigroup head honcho Vikram Pandit from their days at Morgan Stanley, has been appointed to replace the Citi's departing chief administrative officer.

According to Bloomberg, the Morgan Stanley boys are spreading all over Citi.

Callahan is one of at least three of Pandit's former associates from Morgan Stanley to take on management roles at Citigroup. Others include John Havens, who succeeded Pandit as head of the alternative investment business, and Guru Ramakrishnan, now CEO of Old Lane, which remains as a hedge fund managed within the alternative investments unit.

Citigroup's Pandit Taps Callahan for Administration [Bloomberg]

That's right, I said '08. The Land o' Vikram is said to be postponing its axings until the second week of January, just before bonuses are announced, though decisions regarding who will soon be signing up for Chuck Prince's "Fired By Citi? You Are Not Alone: A Daily E-mail" have apparently already been made (if he breaks 10,000 subscribers...nothing worth noting will happen). Managers supposedly handed over the names of people in their respective groups who are going down for the dirt nap last week, so if you're reading this and think you might be one of them, I guess it's too late to do anything about it and you might as well keep doing what you're doing, i.e. reading Dealbreaker and chillaxing in general (we've got some great FBN Happy Hour clips coming up this afternoon, if that's something that interests you, and if not, there's always backdating and proxy access to look forward to).

We hear that Citigroup is poised to name Don Callahan, another newcomer to Citi, as its chief operating administrative officer sometime this morning. The longtime Morgan Stanley marketing executive and a former IBM executive is said to be one of Vikram Pandit's closest advisers. Callahan joined Citi this fall, and has been operating chief of its investment bank and alternative investment group. Citigroup could not be reached for comment this morning.