He sidles up to at least one good point, one we mentioned regarding the Northern Rock failure in 2007: the captain who runs the ship aground should not be given command once it is refloated.
The stock is up a penny in early pre-market trade, at $4.11.
From the Huffington Post:
Citigroup: Too Big To Manage:
Okay, so Mike Mayo finally got his meeting with Vikram Pandit and the rest of Citigroup's senior management, and he even had some nice things to say about the people who run the place, while upping his price target for the bank's stock 50 cents to $4 a share.
So we all can feel happy that the big lumbering Citigroup, which required more bailout money and protection than any other bank during the financial crisis, is finally on the straight and narrow, with management that has the wherewithal to avoid the same mistakes that plunged the bank into despair during the darkest days of the financial crisis two years ago.
Don't bet on it.
I'm not saying that Citigroup is about to fail anytime soon, but make no mistake about it, Citi is a fucked up place. Despite efforts to downsize, it's still way too big, and its management way too feeble to be running a bank of its size, particularly given the competitive pressure Pandit, the CEO since 2007, and his team will face from investors who are pretty tired of holding onto a $4 stock (it closed Monday at $4.03).
That means possibly the most underwhelming group of managers in banking will now be embarking on a "growth strategy" -- to coin a Wall Street cliché -- during a time of incredible uncertainty in the financial business. And you wonder why I'm worried.
It's not that I have anything against Pandit; I've met him exactly once in my career and he seems like a nice enough fellow. He's supposed to be smart. He has a PhD., taught finance, and is said to understand complex investments, like the ones he inherited and which led to Citi's near demise in 2008.
But for all Pandit's smarts, he never quite got the reality that the business model of Citigroup -- known as the universal banking model where individuals and institutions can find all their financial needs taken care of at one place -- could never work.
Citi reminds me of the old Soviet Union, a massive bureaucracy run by people who thought they were smarter than the free markets. Citigroup imploded in 2008; but for years it was failing, unable to meet even the barest definition of a integrated universal bank, and falling behind in profit margins. But like the Soviet Union, Citi was doomed for failure. For the bank to have succeeded, former CEO Chuck Prince and later Pandit and his team would have had to become experts in commercial banking, investment banking, ATMs, and mortgage lending, to name just a few businesses.
They would have to know a lot about risk management in all these areas, and how to integrate the entire massive conglomeration, so products can be "cross sold" -- meaning stock deals underwritten by the investment banks could be sold to small investors as they deposit money into their checking account.
It never happened and never would, yet in early 2008, Pandit held out the dream that he could make it work and keep Citigroup intact, despite calls from analysts that it needed to be broken up and fast.From our September 15, 2007 post, "Northern Rock's New Owners: The British Taxpayer":
It was lunacy of the highest order, yet no one stopped him; not the great Bob Rubin, the former US Treasury Secretary, then a leading board member; or another board member and ultimately company chairman Dick Parsons, whose name inexplicably has been leaked by the White House as a possible replacement for its chief economist Larry Summers....MORE
I know this is off-topic but thanks for the e-mails and yes it is a big deal.
How often have you seen a run on the bank?
Two quick points.
1) Northern Rock will not be allowed to fail. The credit facility the BofE extended is essentially open-ended. NRK has £30bn* in pledgeable assets. Easy for me to say but it's true.
*Thank you Robert Peston for running the numbers
2) The new owners should be interviewing for new managers, NOW.
We learned from our S & L crisis in the early '90's that you don't hire the folks who made the mess to do the clean up....