Citigroup (C) CEO Vikram Pandit may have simply locked himself in the executive washroom and thrown away the key. No one has anything encouraging to tell him and if he does not come out, no one can fire him without slipping a note under the door.
The bank revealed that it was closing yet another hedge fund after its had lost 53% of its value in one month. So much for the new risk management systems that Pandit has put in.
According to the FT, "Citigroup is liquidating its Corporate Special Opportunities hedge fund after it lost 53 per cent of its value last month, marking the ninth time in recent months that the bank has had to close or rescue a fund." Citi will probably lose hundreds of millions of dollars due to the action. It will also undermine the firm’s relationships with some of its most critical customers.
Pandit and his people are not the only ones to blame here. The firm’s board charter assigns certain people to make sure that risk management is properly applied to the banks assets. The people on these committees really should not be on the board, but they are. It is actually remarkable how few of the Citi board members have left the company, especially since many of the firm’s problems sit at their feet.
It has been said too often, but Citi is still a candidate for a government takeover, not just because it has a troubled asset base. Citi has shown a special talent for destroying its own prospects though management which is simply incompetent or under-trained.
The Las Vegas odds that Pandit will not make it until the end of the year are increasing every day.
Douglas A. McIntyre
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