The following is an excerpt from GRETCHEN MORGENSON | October 20, 2012 | Nytimes.com |
THE defenestration of Vikram S. Pandit from the corner office at Citigroup might just be a turning point for shareholders of this great big beleaguered bank. What remains to be seen, however, is whether the change will also protect American taxpayers from future bailouts.
There are many positives in Mr. Pandit’s exit, beginning with the indication that Citi’s directors have finally woken up. No more snoring in this sumptuous boardroom, perhaps.
By appointing Michael L. Corbat to take over as chief executive, the board seems to have recognized that this bank should be overseen by, yes, a banker. Not a lawyer (Charles O. Prince III) and not a hedge fund manager (Mr. Pandit).
Given Citi’s close ties to Washington, we can only hope that the change of command also reflects a regulatory prodding to overhaul the company. And if that involves cutting this behemoth down to a manageable size, then taxpayers should definitely cheer.
“I ask myself, ‘Could I manage one of these places with lots of capable senior officers?’ and I think the answer is no,” said Gary H. Stern, former president of the Federal Reserve Bank of Minneapolis and co-author, with Ron J. Feldman, of the prescient 2003 book “Too Big to Fail: The Hazards of Bank Bailouts.”
“If I were a senior officer or director, that issue would be on my mind,” he added. “Do we really need to be in all the business lines we are in? Do we need to be in all these geographic locations? Are we getting reasonable return on capital, given the risks?”
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