Citigroup, Inc. (NYSE: C) is still in a pinch despite more than a 100% bounce from recent lows, and its still-relatively new CEO is caught right in the middle of a storm he might not escape.  This call comes with some mixed emotions because what is obvious is that Vikram Pandit has been trying to make this horrible banking year and this horrible environment as painless for the company’s employees and to the corporate environment as he could.  Making the decision to layoff the same amount of jobs as many small cities have in their entirety is no easy task.  We have also heard after asking around how Pandit is not a slash and burn CEO.  Whether anyone agrees that the financial supermarket model works or not is now irrelevant since every other "in the club" government-backed banks now mirrors the Citi model that was criticized for years.

Calling out a new CEO is a very rare case, and we want to be clear thatwe are running this from the prediction-side of the equation in thiscase rather than from a public relations side of the equation.  He hasstill not officially been on for a year (Dec. 11, 2007 was his namingdate).  Frankly, any CEO taking over a troubled company deserveslonger.  Pandit deserves a longer tenure than he has been given by WallStreet.  The problem is that now Wall Street and Main Street expectchanges to come about as fast as a dot.com start-up business model.This is not fair and this is a function of things that started longbefore Pandit showed up.

Yet the calls for him to leave are already out in the media from moresources than can be counted.  For a board to have to offer theirsupport behind him and for Prince Alwaleed have to come out to defendMr. Vikram this fast is a true reminder of the situation.  But it isthe speed at which things move now.  If you will recall, Chuck Price,who we did say NEEDED to go was defended in public by the Prince and bythe board of directors several times.

Pandit is still being blamed for the magnitude of asset write-downswhether it is deserved or not.  These problem assets were all therebefore he arrived and if he could have seen the whole picture and howlong the problems would go on he might not have come on.  But eitherway, as CEO he is the one who has to take the blame.  Write-downs arelikely to continue as there are no markets for much of the paper. 

Pandit has been blamed for the lack of layoffs and the lack of unitsales or unit closures.  We think he didn’t want to have to send 50,000or 75,000 workers home, and frankly that is personally honorable.  WallStreet keeps a different scorecard, and what is honorable is not whatstockholders and analysts want.  His first round of cost cuts wascriticized from the start as being very abbreviated and as being toomuted.  This last round of huge layoffs is deemed as being 9 monthsbehind the curve by many pundits.  Citi could have sold off or spun off units as late as Q1-2008.  Unfortunately that time passed for now, at least for any dollar amount worth the sale process.

Pandit was even noted as perhaps "benefiting too much" from Citi’sbuyout of his Old Lane Partners hedge fund.  Citi paid $800 million ofthat and Pandit received a rather large pay day.  This was deemed as avery expensive hire on the part of Citi for a fund which had around$4.5 billion under management.  He then served as head of Citigroup’sinvestment bank and alternative investments group before taking overthe top spot at Citi.  It is certainly not Pandit’s fault that Citineeded him this badly.  Pandit was also not running Old Lane when Citidecided to close it down.  Why this closure was also being notedanywhere toward Pandit other than signing off on it is a mystery, butagain that is Wall Street for you.

Pandit was also given poor marks over the busted buyout where WellsFargo (NYSE: WFC) jumped in line to buy Wachovia (NYSE: WB).  Whetheror not that is a fault or a benefit is something that the history bookswill still decide.  But based upon the rumor mongering and liquidityfears that were being passed around Four-weeks to two-weeks ago whichdrove the stock to $3.00+ might have been enough to break Citi if ithad that leverage. 

Pandit did score with the last government stabilization plan where theywill do a good-bank bad-bank and backstop.  Yet he has been given verylittle credit for this. Perhaps after an 80% drop, Wall Street has nopatience and is too used to frowning.

The last issue that has been talked about is something on a personalnote.  In Pandit’s interviews he did not come across as a tiger nor didhe come across as an instrument of major change or rapid change.  After Wall Streetfinally got rid of Chuck Prince, it seems that they justwanted much more of an aggressive chainsaw wielding CEO who startedfiring and slashing regardless of the overall corporate culture.Being nice and being successful in other areas does not mean that you get good marks as a CEO.  Again, that might not be Pandit’s fault; but that hasn’t kept it frombeing his problem.

We think that the only thing that will keep Pandit on as CEO is a majorbull market recovery because the bailouts turned out to work betterthan expected and because the economy did not get as bad as most hadfeared.  As of today, that does not appear to be the case or at leastis not an above-average odds scenario.

Being the head of Citigroup is a job which few outsiders would want totake.  There is another angle here.  Win Bischoff is very unlikely towant to come back in even as an interim-CEO.  Bob Rubin cannot do itbecause he is currently under a cloud as well.  Most of Citi’s otherboard members are actually non-executive outsiders.  The long and shortis that Citi probably needs to keep Pandit.  Based on the currentenvironment and based upon the criticism, we wonder why he’d want tostay. 

We do not think that Vikram Pandit will get fired.  In fact, he shouldprobably not be fired because CEO’s have to be given time after they are broughton.  We think there is a strong chance that by mid-2009 he is likely to say, "What was I thinking when I took thisjob?  To hell with this mess." 

If you go through the list of 2008 CEO’s to go, almost all of those called out have moved on by now.  If you go through our list of 2007 CEO’s to go, you’ll see that most have hit the road. 

Jon C. Ogg
December 2, 2008

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