“Freddie Mac’s former President, the one who was their Chief Operating Officer right up to the financial crisis and left just about a year before they were placed in conservatorship by the U.S. government (from 2004 through September 2007) is now going to postpone his retirement, so that he can ‘save’ Citi from its regulatory problems with the Fed?”, Mike Perry
“First and importantly, I am not picking on this man. I vaguely remember him and might even have met him, he is not the issue. I am sure he is a fine executive (like I was)…he is just being used as an example by me to make a point. (Truthfully, I don’t think hardly any bankers were doing anything wrong, they were just doing their jobs and got caught in an unprecedented financial crisis.) In my opinion, the government’s pursuit of some crisis era bankers like myself and not others has no rationality to it; it seems unfair and highly arbitrary. As the CEO of Not Too Big To Fail IndyMac Bank, I was inappropriately sued by both the SEC and FDIC (a detailed discussion of these matters is available on this blog) and forced by the FDIC to accept a banking ban that I did not deserve. Yet the crisis era Chairman and CEO of twice bailed out by the government and Too Big To Fail Citi wasn’t sued by either. Nor was Chairman of Citi’s Executive Committee who had encouraged his management team to take on more risk just before the crisis. And here you have the President and COO of Freddie Mac, during all of the events leading up to the financial crisis, and he not only was never sued by any government entity, he moves on with his career and becomes a Vice Chairman of Citi and President of Citibank and is now being asked to delay his retirement, because they need his help with the Fed!!! Yet his former boss (a very decent and honest man in my opinion), the former Chairman and CEO of Freddie Mac is being sued by the SEC for securities fraud and so I believe is Freddie Mac’s former CFO. (Maybe the “sweet spot” is to be President where you don’t have to sign SOX certifications?) I could go on and on citing crisis era individuals who were arbitrarily targeted and made scapegoats by the government and others who were not and allowed to continue on with their careers. Does that sound like America to you? It doesn’t to me.”, Mike Perry, former Chairman and CEO, IndyMac Bank
“I do not seek to be an apologist for bankers…..But outrage does not drive good policy. Though it was by no means an innocent victim, the financial sector was at the center of a number of fault lines that affected its behavior. Each of the actors…..bankers, politicians, the poor, foreign investors, economists, and central bankers…..did what they thought was right.”, “Fault Lines: How Hidden Fractures Still Threaten The World Economy” by Raghuram G. Rajan (Mr. Rajan is the Eric J. Gleacher Distinguished Professor of Finance at the University of Chicago Booth School of Business and former Chief Economist at the International Monetary Fund. He is the coauthor of Saving Capitalism from the Capitalists (Princeton), a fellow of the American Academy of Arts and Sciences, and in 2003 was the inaugural winner of the Fischer Black Prize given by the American Finance Association to the best financial economist under forty.)
Seeking Help, Citi Halts a RetirementBy CHRISTINA REXRODE, CHARLES LEVINSON and JAMES STERNGOLD Updated April 4, 2014 12:38 a.m. ET
Citigroup Inc., shocked by the Federal Reserve’s rejection of its capital plan, is asking a top executive to delay his retirement to help repair the bank’s relationships with regulators.
Chief Executive Michael Corbat told employees in a memo Thursday that Gene McQuade, 65 years old, would oversee the company’s efforts to win Federal Reserve approval for its capital plans. Mr. McQuade was to step down as CEO of the Citibank subsidiary this month.
The Fed last week rejected Citigroup’s proposal to ramp up its stock dividend and share-buyback program, a major setback for the third-largest U.S. bank by assets. The Fed cited weaknesses in the New York-based bank’s ability to accurately project the losses it might suffer in a deep economic recession.
“Whatever the gaps between the Fed’s expectations and our performance, we need to close them,” Mr. Corbat wrote Thursday in the memo, which was reviewed by The Wall Street Journal. “Gene is fully empowered to do whatever is necessary, and I will devote any resource required, to ensure our next capital plan is not objected to.”
The “stress test” process had been run by Chief Financial Officer John Gerspach and Brian Leach, head of franchise risk and strategy, but now people on their teams will report to Mr. McQuade for stress-test related matters. Citigroup declined to make Messrs. Gerspach and Leach available for comment.
The move underscores how important the Fed has become to Wall Street, holding veto power over banks’ plans to return capital to shareholders.
Mr. Corbat’s decision to retain Mr. McQuade comes at a time of increasing scrutiny for Citi. In February, the lender announced that its Mexican unit, Banamex, had suffered a pretax loss of up to $400 million in what the bank described as a fraud.
Mexican authorities and the New York office of the Federal Bureau of Investigation have been investigating the matter, The Wall Street Journal reported in a March 2 story. The probe, which federal prosecutors in Manhattan also are involved in, is examining whether any criminal violations occurred at Citigroup’s Mexico unit, according to a person familiar with the matter. Citigroup has tapped law firm Shearman & Sterling LLP to conduct an internal investigation of the loss, which involved short-term credit Banamex provided to Oceanografia SA, a key supplier to Mexican oil giant Pemex, according to a person familiar with the process.
But Thursday’s announcement shows Citigroup has broader concerns. Since the financial crisis, the Fed has conducted annual stress-test reviews of major banks to examine how they would perform in a severe recession. Citigroup and other banks, including Bank of America Corp. , struggled with early versions of the test, getting rebuffed in efforts to return capital to shareholders.
After Citigroup was rejected in 2012, Citigroup’s board, led by Chairman Michael O’Neill, replaced then-CEO Vikram Pandit with Mr. Corbat.
A low-key Citigroup veteran, Mr. Corbat had done stints as a Salomon Brothers salesman and an executive overseeing Citi’s wealth-management business. He gathered experience working with regulators as CEO of Citi Holdings, the bank’s portfolio of noncore businesses and assets. Overseeing the divestiture of more than 40 businesses, Mr. Corbat played an important part in the firm’s slimming down and getting healthier after the financial crisis forced it to accept two doses of U.S. government aid.
But recent events suggest Citigroup’s problems haven’t gone away. Some critics have expressed concern the company is too sprawling to manage effectively. With activities in more than 160 countries and jurisdictions, Citigroup gathers about half of its revenue outside North America.
Mr. McQuade joined Boston-based FleetBoston Financial Corp. in 1992 and eventually became its president and chief operating officer. When Bank of America agreed to purchase Fleet, Mr. McQuade initially chose to remain as president under then-CEOKenneth Lewis. But he resigned the month after the deal closed in early 2004. Mr. McQuade joined Citigroup in 2009 as CEO of the Citibank unit, where he sought to strengthen controls and relationships with regulators.
Citigroup bought Banamex in 2001, and, until recently, it had been seen as a crown jewel.
The bank has previously been reprimanded by regulators for weaknesses in its anti-money-laundering systems.
A Citigroup spokeswoman said at the time the bank “has made substantial progress in strengthening” its compliance with rules to prevent money laundering.
Regarding the recent Banamex matter, the bank has threatened to claw back compensation for those involved in the loss.
“We will continue to collaborate with all the authorities in the investigation and in clearing up” the matter, said Banamex CEO Javier Arrigunaga at a news conference Thursday.—Dan Fitzpatrick
and Amy Guthrie
contributed to this article.