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Unexplained Mysteries: Why Chuck Prince Still Has A Job

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Here’s are a bunch of things that Chuck Prince has done since he became CEO of Citigroup that could be characterized as “dumb” (many courtesy of Duff McDonald who, unlike Prince Alwaleed, is keeping count. It is by no means comprehensive). :
- He’s said some stuff that makes him sound like he has no idea what he’s talking about. (“In July, Prince injudiciously announced that Citi would continue “dancing” to the music of the buyout boom until it stopped. Less than a month later, the roof was falling in on the dance hall.”)
- He’s exhibited little-to-no follow-through (In 2005, Prince sent out a lot of emails about how the bank should “maintain positive operating leverage” but didn’t actually get around to doing it ‘til 2007).
- He got rid of the guy keeping Maria Bartiromo’s ass in his direct line of vision.
- He more or less encouraged a lot of talent, including former co-chief Bob Willumstad and Marge Magner, head of the company’s consumer-banking unit, to give JP Morgan a chance.
- Old Lane
- He fired trading chief Thomas Maheras, who people seemed to have actually liked (how else can you explain the visible tears and “You suck, Prince! Bring Tom back” chants on Friday?)
- $6.5 billion of pre-tax losses and writedowns.
You’d think such faux-pas would be cause for Prince’s termination, but it’s the two things he’s done since taking over for Weill that could and should be characterized as “genius” that are keeping him in the employed state he’s become accustomed to:
- Lowering the bar: Prince has so far lowered everyone’s expectations of Citigroup that analysts are constantly given the opportunity to say, “You know what? They actually didn’t fuck shit up quite as badly as we were expecting. You really surprised us, Citi. Pizza for everyone.” On today's "earnings" announcement: ``Their revenues actually weren't as bad as we were expecting,'' Jeffrey Harte, an analyst at Sandler O’Neill & Partners LP said. ``The trading and some of the banking businesses held up better than we thought." Prior to announcing next quarter’s earnings, Chuckie will start a whisper campaign that the ‘group has gone bankrupt and been forced into downsizing measures ranging from “no paper clips” to “TP that makes sandpaper look good.”
And Prince has so brilliantly managed people’s expectations at what he himself is capable of that he’s no longer held to actually carrying out things that would be “good” (don’t even say “profitable,” nobody’s ready to hear that) for the bank (which presumes he ever was, as one conspiracy theory about the Prince-driven train wreck is that it was Sandy Weill’s elaborate plan to create a bank that would inevitably fail upon his departure, just so he could feel “needed”). On today’s announcement of third-quarter earnings falling 57 percent? “Prince is doing the right things strategically. It's become more of an execution problem lately.''
- A harem of fanboys: first, there’s Bob Rubin, who’s paid $17 million a year to play (what sounds like a pretty kinky) game of “corporate and diplomatic glad-handing…of the highest order” and occasionally offer suggestions, which are either bad ones that Chuck is following blindly, or good ones that Prince sees no room for in Citi’s “strategic vision” of failure. They have each other’s backs, because they both know what it’s like to be paid millions to do jack shit. Then there’s the board in general, which just this morning was said to be “comfortable” with the recent managerial changes at the company and feels that its “strategic plan is working.” Of course, it was Prince who was speaking on the board’s behalf, but it’s entirely possible that its members have deluded themselves into thinking such ridiculous things (if there’s one thing we know at DealBreaker it’s that Stockholm syndrome is very, very real). Finally, it’s virtually impossible to forget Prince’s #1 advocate, and Citi’s largest shareholder, Prince Alwaleed, whose seemingly limitless support for the CEO has undoubtedly seen this conversation to pass: “Did you burn the place down today?” “Nope.” “Great work! If I could promote you above chief executive, I would. Here’s a virgin for your troubles.”
Basically, someone should give this guy the MacArthur award. But how much longer can the charade last? Some people are saying Rubin’s (and therefore, maybe, Chuck’s) days are numbered, and James Cramer’s “sources” tell him that Prince will be fired by the end of the week. So purely basing our answer on what we know about the voices inside Uncle Jim’s head, we’re going to go with--and this is just sort of a reflex thing--never.
Game Plan: Earnings Bonanza! [CNBC]
The Hanger-on [NYM]
Citigroup turmoil turns spotlight on Rubin [Reuters]
Citigroup Net Falls 57 Percent on Fixed-Income Losses [Bloomberg]