Vikram Pandit became chief executive of Citigroup in December 2007, after the giant bank bought his hedge fund, Old Lane LLC, for $165 million. He was hand-picked by interim Chairman Robert Rubin to replace the failed Charles “One Buck Chuck” Prince, nicknamed for the trajectory of the bank’s stock under his highly compensated tenure. If things are starting to sound familiar…
Rubin, of course, was Bill Clinton’s Treasury Secretary, who pushed hard for banking deregulation, including the 1999 repeal of Glass-Steagall. Rubin came out of Goldman Sachs (where he was a high-flier along with another guy at large, Jon Corzine of the failed MF Global). Rubin was very tight with Sandy Weill, who, along with Jamie Dimon, now in charge of JPMorgan Chase, built Citi into a giant “financial services” conglomerate, breaching the walls between commercial and investment banking even before full deregulation. You remember Sandy: The banker/stock hyper for Enron.
Along with Goldman, Citi was most responsible for the subprime bubble and collapse, along with the dodgy derivatives schemes that nearly brought down the world financial system. This was nothing new. As Simon Johnson of MIT wrote, “Citibank (and its successors) has been at the center of every major episode of irresponsible exuberance since the 1970s and essentially failed — i.e., became insolvent by any reasonable definition and had to be saved — at least four times in the past 30 years (1982, 1989-91, 1998, and 2008-09).”
So Pandit was brought in as Mister Fix-It. He had no commercial banking experience. But neither did Rubin. Both were professional gamblers, which in the investment-banking world was not a bad thing back when the speculation was mostly about creating and funding companies, innovations and jobs — and it was walled off from taxpayer-protected commercial banking. If the gamblers lost, tough luck. In any event, the fixing was already done thanks to the federal government’s TARP bailout. You may have lost your house and you likely saw a big drop in your net worth. But you saved the big banks. As a bonus, the Too Big to Exist Banks got bigger and effective regulation was foiled.
Yet during Pandit’s tenure, Citi never quite righted itself. Shares are lower than when he took over. It never stopped gambling, just did it worse than expected. Poor VK didn’t even have a London Whale like Jamie. Nevertheless, he was forced to walk the plank today by the board (or “chose to resign). His penalty: total compensation of $261 million.
Think about that: $261 million to fail. While millions of average Americans can’t even get a low-paying, abusive “right to work” job.
Tell me we’re not a corrupt society. Tell me another.
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Today’s Econ Haiku:
CEOs vote you
If you want to keep that job
Koch, it’s the real thing