The latest reports indicate support from Treasury Secretary Timothy Geithner has helped Citigroup Inc. (NYSE:C) CEO Vikram Pandit to fend off Sheila Bair's attempt to push him out of his job. According to Bloomberg Monday, the Treasury will complete an agreement to take a 34% stake in New York-based Citigroup, allowing the firm to complete an exchange of preferred shares for common stock announced three months ago.
The $58 billion stock swap was reportedly held up as the Federal Deposit Insurance Corp. chairman pressed to have Pandit replaced with an individual with commercial banking, rather than investment banking experience. Citing "people with knowledge of the Treasury Secretary's views," Bloomberg said Geithner insists that Pandit's turnaround plan be given time to work.
The notion that Bair was trying to push out Pandit was first reported in the June 5 Wall Street Journal. Reports that she has been defeated only one business day later raises doubt about the veracity of the initial report of her meddling.
Given that the Fed, not the FDIC, is Citi's primary regulator, it would be a breach of protocol for Bair to press hard for the ouster of an executive on the fringes of her jurisdiction. But a great way for her rivals to undermine her would be to leak news of her straying beyond her authority and then being slapped back. She has ruffled plenty of feathers -- including Geithner's -- and there are quite a few who might like to tarnish her reputation. Bair made Geithner look bad in front of Congress earlier this year when she said mortgage foreclosure mitigation provisions being undertaken by Treasury were too timid. She also has been accused of a power grab for all but demanding that the FDIC be given the assignment if Congress allows regulators to seize and wind down failed nonbank financial firms. - Bill McConnell
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