And so the obituaries for the five-year tenure of Citigroup’s troubled Chief Executive Officer must now be written. While inevitably there will be those who will cite Pandit’s “righting of the ship” and “right sizing” of Citigroup, allow me to provide a dose of perspective.
Pandit was the CEO who couldn’t stabilize Citigroup even after receiving $45 billion in taxpayer cash to replace equity capital that had been destroyed by bad bets and risk management gone wild. The CEO who couldn’t reassure the markets even after the bank received an additional taxpayer guarantee related to $306 billion in toxic assets. The CEO who couldn’t keep Citigroup’s stock price from dropping below the average ATM fee it charges, even when— in addition to all of the aforementioned bailouts—the bank also received a boost in its share price from being able to retain tens of billions of dollars in tax credits that would have been lost but for a waiver from Citigroup’s and Pandit’s best friend at times of need, the United States Treasury Department.
Yet despite all of this generosity, Citigroup, alone among its peers, still required the government to move down the equity ladder and convert $20 billion of its holdings to common stock, making all of us, for a time, one-third owners of Citigroup and making Pandit the taxpayer’s CEO.
Sure Citigroup paid back the money as the rest of the government’s bank-friendly policies kicked in, but let’s not forget for one moment that it was only the generosity and unwavering allegiance of Citigroup’s long-standing allies in Washington who saved the bank from the normal and destructive functions of capitalism; who made sure that it continued to maintain its status as being too big to fail; and who have thus set an under-capitalized and unmanageable Citigroup up for a future fall that will inevitably throw it back into the government’s arms. So forgive me if I do not spill a glass of Dom in Pandit’s memory. This obituary should have been written long ago.
Neil Barofsky is the former Special Inspector General of TARP and a Senior Fellow at NYU School of Law, as well as the author of Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Main Street.