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Citigroup Inc. (NYSE: C), fresh off the canning of former CEO and underperformer Chuck Prince, has said that a reorganization of its investment-banking unit [subscription required] is in order. In addition, the company will be "removing" the head managers of its credit-markets group. At the same time, Citigroup will initiate a tighter integration of its equity and fixed income operations.In other words, Citigroup is moving two executives to other roles and will be putting in place more safeguards to prevent the kind of underwriting messes and income mismanagement that helped the company to billions in write-downs in its latest quarter. Yes, the tearing down of Prince's once-mighty kingdom has begun.
This was probably in the works before Prince got the boot. There are so many things that Citigroup must now do to rectify itself and reduce exposure in some areas -- but of course, it will take time.
The Wall Street Journal reported that Vikram Pandit (from the acquired Old Lane Partners) wants to tear down the walls that were up between bankers that sell such products as high-yield bonds from those that sell stocks or derivatives. The point? Get them more focused on customer needs and not their own firm's needs. Greed and customer ignorance built Prince's kingdom; a return to putting the customer first could easily help save it.
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Reader Comments (Page 1 of 1)
11-19-2007 @ 11:25PM
steve said...
Those "Chinese Walls" between Investment Banking
and equity/FI were meant to discourage the spreading of info that was making Citigroup lots of green for years. They essentially had their own little
insider trading scheme going on for years till the fed caught up with them and enforced compliance.
This is what steered Citi to a bloated, easy-money
focus, rather than organically growing. They took the easy way out for years, accumulating assets and trading on inside, company-generated info, rather than doing it the hard way. What happened
is that they got caught with their "walls" down,
the feds finally froze their outside purchases, forced
them to wall up, and put the screws in. Sub-prime
notes were the final nails in a coffin that was long
due to be nailed shut. Prince did Sandy's dirty work
for years, and was the last man standing when the heat finally kicked in. Now the games over, and
its time to tear down the umbrella of hubris that
at a certain point simply could not sustain itself.
One wonders if this would have happened 10 years
ago if Alwaleed didn't throw his grub stake in.
For Citi, the game is truly over...