A Wall Street source has told me that there is a rumor floating around that current Treasury Secretary Hank Paulson is leaving his post to take over Citigroup Inc. (NYSE: C).
Naturally, this rumor interests me because I have posted wistfully about this outcome for the last several months. While Paulson may not be the greatest Treasury secretary in American history, he had an excellent track record at Goldman Sachs Group (NYSE: GS) and he would do his reputation a big favor if he could step into Citigroup and save it from ruin.
Citigroup has been hurting badly all year. In the first part of 2007, it suffered because its costs were growing faster than its revenues. Then it missed its third-quarter earnings numbers and announced a much bigger-than-expected write-down of assets related to subprime mortgage-backed securities. This culminated in the departure of Citigroup's CEO, Chuck Prince on November 4.
Hank Paulson could be a good replacement for Prince. He was CEO of Goldman from May 1999 to May 2006, during which time the firm's revenues rose 173% to $69 billion and its profits climbed 252% to $9.5 billion. And its stock during that period was up 105% to $152 a share.
But in June 2006, Paulson left to become Treasury secretary. A Washington source told me that his brusque management style -- which worked well at Goldman -- has rubbed people the wrong way. But that should not take anything away from Paulson's accomplishments at Goldman.
So how about it Hank? Show your cards and keep my shares of Citigroup from dropping any further.
Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He owns Citigroup shares and has no financial interest in Goldman Sachs.
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