The only big deal about Vikram Pandit "stepping down" as Citigroup Inc. (NYSE:C) CEO and his removal from the board is that it didn't happen sooner.
The truth is he didn't leave voluntarily. He was given an ultimatum by the "new" board of directors: resign or be fired.
Poor old Vikram. This was a setup from the start.
He ended up at Citigroup when the mega-bank bought his Old Lane hedge fund for more than $800 million.
Poor old Vik pocketed about $165 million in the sale and continued to run the fund, some say into the ground, until Citi shut it down.
In 2007, my favorite Goldman Sachs Group Inc. (NYSE:GS) ex-CEO Robert Rubin (who after pandering to all the big banks in the country as Secretary of the Treasury in Bill Clinton's administration, then pimped himself to Citigroup after allowing Citibank to merge with Sandy Weill's Travelers insurance conglomerate (that owned Salomon Smith Barney) in an illegal deal that required Congress to kill prudent banking laws (Glass-Steagall) to make it legal actually handpicked Vikram to run the bank.
Super rich-boy Bob Rubin, of course, had nothing to do with running Citibank after making it the mega-bank it became as a result of the merger; he was merely a special consultant to the board, or some B.S. like that.
But here's what really happened...
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Why Citigroup CEO Vikram Pandit Was Forced Out (NYSE: C)
Citigroup CEO Vikram Pandit announced today (Tuesday) he has made an abrupt departure from the troubled bank, the day after it reported third-quarter earnings that beat estimates.
The story became more interesting as the day wore on after it was announced he was forced out by the board.
The theories as to why Pandit would be asked to leave got juicier as the Citigroup Inc. (NYSE: C) CEO's exit was paired with the co-resignation of Citi COO John Havens, a long-time associate of Pandit.
Mike Holland, chairman of New York-based Holland & Co, which oversees more than $4 billion of assets told Reuters, "It's not a shock that [Pandit] is no longer there, but the surprise is this is all happening very quickly. Why is he leaving so quickly? I'm not a Citi shareholder, but if I were I'd be disappointed that Havens is gone, in some ways more than Pandit."
The timing hinted the two exits were not simply a natural transition, but instead related to some skeletons lurking in the bank's boardroom.
Just as quick and startling was the immediate removal of Pandit's name and photo from Citigroup's Website.
The swift announcement that Michael Corbat, previously chief executive for Europe, Middle East and Africa, would replace Pandit as Citi's CEO and board member also raised some eyebrows.
So what could've caused this sudden changing of the guard?
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- Paulson Cuts Stake in Bank of America, Citigroup, and JP Morgan
Taxpayers Ring Up $12.3 Billion Profit on Citigroup Bailout
The U.S. Treasury on Monday will complete the sale of warrants of Citigroup Inc. (NYSE: C), allowing it to realize a $12.3 billion profit from its bailout of the banking giant.
The United States will record a net $312.2 million from the sale of its final 465.1 million warrants to purchase common shares of Citigroup, the Treasury Department said Wednesday. Last year, Treasury sold its 34% stake in Citigroup common shares.
The warrant sale is the latest step in disposing of the bank's assets after the government lent the company $45 billion in Troubled Asset Relief Program (TARP) funds during the height of the financial crisis in 2008.
Money Morning Mailbag: Tobin Tax the Only Solution to Problems Posed by High Frequency Trading
An episode of the television news program "60 Minutes" that aired Oct. 10 highlighted investors' fears over the growing trend of high frequency trading (HFT) run by a world of "supercomputers."
The "60 Minutes" piece prompted this letter from a reader wondering if the technological shift means it's time to readjust investment strategy.
Sunday night on "60 Minutes" they had a story about high-speed computers that are out-trading humans. Is it time to refocus on the world stage and find tangible rather than paper investments to put your money in? A partnership in a retail or manufacturing venue surely is more transparent than the stock market.
--RomanMoney Morning has been examining the effects of high frequency trading for years. In August 2009 Contributing Editor Martin Hutchinson said high frequency trading systems were front-running the market.
China Steps Up Effort to Derail BHP Bid for Potash
China is attempting to derail BHP Billiton Ltd's (NYSE ADR: BHP) bid for Potash Corp. (NYSE ADR: POT), as Beijing frets over the long-term supply of resources, according to a report yesterday (Wednesday) by the Financial Times.
Fearing that it could have a negative impact on Chinese imports, the state-run Sinochem Group has hired Deutsche Bank AG (NYSE: DB) and Citigroup Inc. (NYSE: C) to help disrupt BHP's bid for the fertilizer company, people familiar the matter told the FT. A Chinese bank, thought to be Industrial and Commercial Bank of China, was also part of the team.
Citigroup, which acts as joint corporate broker to BHP along with Bank of America Corp.'s (NYSE: BAC) Merrill Lynch unit, has asked to be relieved of its role in BHP's bid in order to advise Sinochem on a potential counter-bid.
JPMorgan Shuts Prop Trading Unit as Banks Maneuver Around the Volcker Rule
JPMorgan Chase & Co. (NYSE: JPM) became the first investment bank to take steps to comply with the so-called "Volcker Rule" by shutting down its proprietary trading unit.
JPM, the second-biggest U.S. bank by assets, told about 20 traders who work on its commodities trading desk that the company will close the unit, Bloomberg News reported, citing an anonymous source.
The bank eventually will close all in-house trading to comply with new U.S. curbs on investment banks, said the person, who asked not to be identified because New York-based JPM's decision hasn't been made public.
The Tobin Tax: The Deficit-Busting Levy Wall Street Hates
After the Nov. 2 midterm elections, the Obama administration and Congress are going to have to scramble to fill a trillion-dollar hole in the U.S budget, and tax increases may be the only option.
A tax increase won't be good news for an already wheezing economic recovery that seems to get weaker with each new report or indicator that's issued. But the type of tax that's chosen will go a long way in determining just how much damage the U.S. economy will have to endure.
With a deficit in excess of $1 trillion, there aren't a lot of options. One possibility would be to allow the 2001 and 2003 Bush tax cuts to expire, which would have a depressing effect on the economy and most people's pocketbooks.
But a better option would be to devise some new taxes that may prove less damaging. Indeed, there's even one possibility that might even do some economic good if it's implemented correctly.
It's called a "Tobin tax."
To see how a reasonably set "Tobin tax" could help U.S. leaders to fix the nation's finances, please read on...
Cost to Fix Fannie Mae and Freddie Mac May Reach $1 Trillion
The cost to fix Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE), the government-backed mortgage companies that bought or guaranteed three-quarters of all U.S. home loans last year, could run as high as $1 trillion, according to a report by Bloomberg News released yesterday (Tuesday).
The minimum amount required to keep them afloat will be $160 billion, or $15 billion more than they have already drawn from an unlimited line of government credit granted to keep the home mortgage market functioning. That exceeds the amount already spent on bailouts for American International Group Inc. (NYSE: AIG), General Motors Co. or Citigroup Inc. (NYSE: C).
"It is the mother of all bailouts," Edward Pinto, a former chief credit officer at Fannie Mae, who is now a consultant to the mortgage-finance industry told Bloomberg.
Fannie and Freddie own or guarantee 53% of the nation's $10.7 trillion in residential mortgages, according to a June 10 Federal Reserve report. Their books are loaded with millions of bad loans, and delinquencies are on the rise.
The Tobin Tax: The Fix-It Plan Wall Street Hates … But Can't Seem to Kill
German Chancellor Angela Merkel recently came out in favor of a "Tobin tax" - a small tax on financial transactions, proportionate to the size of the transaction. The Tobin tax idea also has been proposed by Britain's former prime minister, Gordon Brown, and was proposed in Congress by U.S. Rep. Peter DeFazio, D-OR.
Every time a Tobin tax is proposed, it has failed to gain traction - which isn't surprising: Wall Street, with its international affiliates and legion of lobbyists, hates the idea.
Even so, the Tobin tax idea just refuses to die - which is a good thing, since it is probably the best way of curing some of Wall Street's pathologies.
To understand how the Tobin tax can benefit investors, please read on...