THE Citi Never Sleeps – but, ap parently, its directors do. Washington was forced over the weekend to come to the res cue of Citigroup – a once- great bank brought near to ruin by a grossly negligent board of directors.
The cost? A mere $351 billion – that is, only $1,000 for every man, woman and child in America.
Blame abounds, but most of it must accrue to the Citigroup directors – the men and women paid well to make corporate policy, and to oversee its proper execution.
What were they thinking?
Were they thinking?
Some of them are already gone. If those who remain had any sense of decency, they’d simply quit.
Who’s still there?
C. Michael Armstrong, who made a total of $242,022 in cash, stock and other compensation in 2007; Alain J.P. Belda ($170,181); Kenneth Derr ($241,667); John M. Deutch ($260,000) and Andrew Liveris ($163,474).
Also, Anne Mulcahy ($240,000); Richard Parsons ($200,594); Roberto Hernandez, ($2,610,000); Robert L. Ryan ($43,750); Judith Rodin ($170,181); and Franklin Thomas, ($231,250).
At best, they snoozed through the company’s massive build-up of bad debt and rancid security instruments.
Again, they need to go.
(Better yet, put them all in stocks in Times Square and let passers-by pelt them with toxic paper.)
Already gone, though not soon enough, is former Director Robert Rubin – the one board member who seems to have been wide awake the whole time.
Rubin, the Clinton administration treasury secretary who successfully engineered the bank deregulation that made so much of the current mess possible, was appointed to the Citi board in 1999.
Then, it seems, things began to happen.
That is, Rubin apparently undertook to test the limits of his new banking rules.
In a 4,076-word autopsy of Citigroup’s “rush to risk,” The New York Times on Sunday labeled Rubin “an architect of the bank’s strategy.”
It describes him as having “pushed to bulk up the bank’s high-growth fixed-income trading,” including risky debt instruments.
Risky is hardly the word for it – though in mid-2007, according to the newspaper, Citi brass claimed that the likelihood of subprime mortgages actually defaulting “was so tiny that they [were] excluded from their risk analysis.”
And this was after Bear Stearns imploded, telegraphing the full scope of the crisis.
Citi’s CEO at the time, Charles Prince, never questioned the preposterously rosy assessment.
Nor did then-board Chairman Winifred Bischoff, who was paid $6.1 million and got a low-interest loan of $343,390 in 2007.
What were they thinking?
Did the prospect of ballooning profits totally blind them all to the risk?
Rubin left the board in August 2007, having stuffed his pockets with $107 million from Citi since ’99.
The following November, Prince was fired – walking off with company stock then worth $68 million, according to the Times, and a bonus for 2007 of $12.5 million.
In the end, federal regulators had no choice but to structure yet another corporate bailout – this time to rescue a bank with $2 trillion in assets, more than 300,000 employees and operations in more than 100 countries.
Just letting it collapse would wreak global financial havoc.
But to rescue it without calling out those who engineered the disaster would be an affront to justice.
There should be no mistake about where the responsibility resides.
That would be with the Citigroup board of directors – and Robert Rubin in particular.
