Citigroup to take $11 billion write off as Rubin steps up and Prince steps down

Posted Nov 4th 2007 7:41PM by Peter Cohan
Filed under: Citigroup Inc. (C), Merrill Lynch (MER)

Reuters reports that Citigroup Inc. (NYSE: C) has accepted the resignation of Chuck Prince five days after Merrill Lynch & Co.'s (NYSE: MER) CEO Stanley O'Neal quit. And, as expected, Robert Rubin, 69, has taken the Chairman's job while the Sir Win Bischoff, 66, who runs Citigroup's European operations, will become acting CEO.

The big shocker was not in Citigroup's organization -- it was the magnitude of the additional write off of bad mortgage securities -- in the range of $8 billion to $11 billion. This is on top of the $6.5 billion that Citigroup wrote off three weeks ago for subprime mortgages, loan losses and other debt. I shudder to think how big a write off Citigroup will have to take if it can't get a bailout for its $80 billion worth of Structured Investment Vehicles.

How will a permanent CEO be selected? A special board committee consisting of Rubin, Alain Belda, Richard Parsons and Franklin Thomas will seek a replacement for Prince from internal and external candidates. As I posted this morning, I vote for Thain.

Update: Bloomberg News reports that Citigroup is trading up 5.8% in Tokyo where Monday trading has begun on the announcement of Prince's resignation.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He owns Citigroup stock and has no financial interest in the other securities mentioned.

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Reader Comments (Page 1 of 1)

11-05-2007 @ 2:24AM

Alex Esguerra said...

All I can say is can you guess who will be next to resign?

I already have a gut feel but it's my "SECRET". Only for my own......

The hardest part of these resignations is the legacy and how a company's history will write about a CEO's tenure.

Hence, this is one of the reasons why I have never wanted to get big and greedy. The bigger you are, the more shame you face. Well of course, if CEO's were never the fore fathers or founders of the company are entirely different as money comes with the goodbyes if do never started or owned a company.

But for a small guy, entrepreneur and founder, it is your dignity and your own self that destructs which is why original founders will be great CEO's in the present crisis as they will fight to the end.

11-05-2007 @ 10:12AM

Terry said...

Cross your fingers for Rubin. Hopefully that fact that he was Secretary of Treasury, head of Goldman Sachs, director at Ford,etc etc (see article with connections: http://www.newsvisual.com/newsvisual/2007/11/robert-e-rubin.html ) ...means that he's got the experience to make something good happen in all of this.