Citi has had violations, law suits, Federal Cases, and has continued practices such as inordinate high interest rates (often 29%+) on Credit Cards that it issues, despite the will of Congress against such practices. It't major stockholders in the Middle East seem to have no loyalty to the USA, US culture or US law.
So when Citi pleaded and settled a suit on fraud which cost the bank $200,000,000+ it awarded a $10,000,000 bonus to it's executives, assumably because they expected to have to pay even more.
No wonder Vikram Pandit abruptly stepped down as CEO of Citigroup on Tuesday, surprising Wall Street. He has done as well as he could by Citi which bought his company for millions before hiring him.
Pandit’s replacement, effective immediately, is Michael Corbat, the current CEO of Citigroup’s Europe, Middle East and Africa division, the bank said. Corbat has worked at Citi and its predecessors since he graduated from Harvard in 1983, it said.
Pandit will also relinquish his seat on Citi’s board of directors.
The news shocked Wall Street, a day after the bank reported strong earnings, due, no doubt in part to those high interest rates they charge.
Today, Citi is the country’s third-largest bank, with $1.9 trillion in assets, according to the Federal Reserve. It trails only JPMorgan Chase, with $2.3 trillion, and Bank of America, with $2.1 trillion.
But Pandit’s massive pay packages have raised the ire of investors. Some in government believed the bank was too slow to address its problems as they emerged in the months before the crisis caught fire in September 2008. Some believe, the bank is a 'can of worms' with multiple layers of poor, perhaps even improper business practices.
Citigroup offered no explanation for the sudden departure of its two top executives.
One must wonder what violations of law and ethics will be disclosed later at Citi if the company pattern holds true.
Some believe that it will be hard for big banks to boost their share prices with past practices of unethical behavior and gouging practices as new regulations from the Obama Administration gradually begin to take effect. His credit card watchdog group has already nailed one group for millions in overcharges to American consumers.
Global Perspectives believes that stockholders should stand up against executives and oppose massive pay packages when a company’s stock is flat-lining. The only way to rebuild an ailing financial system is to first cut out the cancer of corruption in big banks.
In April, Citigroup shareholders rejected the bank’s proposed pay deals for executives including Pandit. It was the first time shareholders dinged a Wall Street bank under a provision of the 2010 financial overhaul law that gives them a non-binding vote on executive pay.
Fifty-five percent of the shareholders objected to deals including the $15 million that Pandit received last year, in addition to $10 million in retention pay. He had accepted a token $1 in compensation in 2010.
The retention pay was to vest in 2013, as an incentive for Pandit to stay on as CEO. A bank spokeswoman could not comment immediately on whether he would receive any of that money.
In March, Citigroup surprised observers by failing its stress test, the Federal Reserve’s annual checkup for banks. The Fed said Citi, unlike any of its peers, did not have enough capital to raise its stock dividend and still withstand a financial crisis worse than 2008.
Pandit, 55, said in a statement Tuesday that “now is the right time for someone else to take the helm at Citigroup” after the bank “emerged from the financial crisis as a strong institution.”
Pandit joined Citigroup in 2007 when the hedge fund he founded was acquired by the bank. He quickly rose to CEO in December 2007. Earlier, he had ascended to head of investment banking at Morgan Stanley before leaving in 2005 to form the hedge fund.
A native of India, Pandit attended Columbia University at 16 and completed a bachelor’s degree in three years. He earned a doctorate in finance in 1986.
Pandit faced harsh criticism after Citigroup took $45 billion in government bailout money in the 2008 credit crisis. It is widely believed that other, stronger banks were forced to take billions in bailout money to divert attention from Citigroup, whose financial situation was more precarious.
The U.S. Treasury sold the last of its stake in the company in December 2010, reportedly for a profit.
In October 2011 the company agreed to pay $285 million to settle civil fraud charges that it misled buyers of a complex mortgage investment just as the housing market was starting to collapse.
The Securities and Exchange Commission said Citigroup bet against the investment in 2007 and made $160 million in fees and profits. Investors lost millions.
Citigroup neither admitted nor denied the SEC’s allegations in the settlement.
Goldman Sachs paid $550 million to settle similar charges and JPMorgan Chase & Co. paid $153.6 million. All the cases have involved complex investments called collateralized debt obligations. Those are sometimes considered unreliable securities that are backed by pools of other assets, such as mortgages, also considered of questionable quality.
In December 2011, in typical "hedge fund fashion, disregarding matters such as loyalty to long term employees Pandit announced the company would eliminate 4,500 jobs to cut costs. The cuts represented about 1.5 percent of its global workforce of 267,000. When he was first hired in 2007, the company had 375,000 employees. Thus 100,000 jobs less, rate gouging, unfortunate billions of loans to the PIGS nations troubled Europe and fraudulent activities over the next few years brought Citi huge profits (on paper) under Pandit's leadership. We will have to wait to see then"underside" results of Citi decisions.