So who's to blame for the mess at Citigroup Inc.? Thursday, in a long post, we poked at a story in The New York Times full of simpleminded and, in some cases, wrong, assertions about the now 10-year-old Citibank-Travelers merger. The story was clearly an attempt to lay all the blame on now-retired Sandy Weill, which seemed a rather overly broad indictment given the complexities of the situation. Friday, in the
Financial Times, however, John Reed, the former Citibank CEO and chairman who lost out to Weill in a boardroom struggle, surfaces to suggest that the deal "was a mistake" and that the problems emerged "a few years after the merger was closed," that is, when Weill was in charge.
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Clearly, Reed has an ax to grind, which the FT admits. The heart of his charge seems to be that Citi has suffered a general weakening of "the management fabric" at Citi. "If the body loses its immune system, you are going to die of something. The core of what was happening was a lack of supervision and structure at the managerial level."
That brings a smile. Gee, it's fun to hear Reed's characteristic elliptical style again: the universal pronouncement tied to the vaguely scientific or technical metaphor. Indeed, the cliche Reed is peddling may even have some validity. But it could apply as easily to Citi's subprime debacle as to Reed's own darkest moment, when Citibank submerged beneath a veritable mass of bad real estate and leveraged loans. If you go back -- and who bothers? -- and read the reporting on that mess, Reed himself admitted that he lost control of the bank and failed to supervise the traditional bank lending operations in his zeal to build out the bank's consumer and electronic bank. I was involved in the editing of a cover story at Institutional Investor in September 1991, when the bank was close to failing, that examined the longer-term erosion and corruption of Citi's credit culture under, ah, Reed.
Now Citi survived (probably because it was too big to fail) and a chastened Reed held onto his job. Citibank did well in the '90s, driven by credit cards and global consumer banking -- Reed's specialties. But for all his talk now, Citibank was always known as both a talent generator and as a rough, slightly dysfunctional culture, and there's really no one around that really remembers Reed as the builder of prudent, caring, antibody-rich culture except as an exercise in nostalgia.
Maybe we should blame both of them. - Robert Teitelman
See story from The Financial Times
See story from The New York Times
See related reaction post from Dealscape
Comments
The deal was a mistake. Yes Sandy and Reed is very much responsible. as well as the Board of Directors that are suppose to protect the interest of the investor. Reeds comments are valid. Citi need to clean shop at the top. Start with the Board of Directors and Break up the company.