As it watches every one of its rivals, including Bank of America (BAC), join the we’re-paying-back-the-TARP party, Citigroup (C) is stuck with the government as a meddlesome silent partner.
The company took in an exceptional level of assistance, and it didn’t have the luxury of not converting the government’s preferred stock into common, which all the other banks were eager to avoid.
So, now comes the fun part. According to WSJ, the FDIC wants to see a shakeup at Citi, and not just on the board. It’s ready to kick Pandit to the curb.
Federal officials have reached out to Jerry Grundhofer, the former U.S. Bancorp CEO who recently joined Citigroup’s board, to gauge his interest in the top job, according to people familiar with the matter. Mr. Grundhofer, who didn’t return calls seeking comment, is well-regarded in the industry for steering U.S. Bancorp to profitability while avoiding the risky lending that hurt Citigroup and many other banks.
While it would be unfair to blame Pandit for Citigroup’s problems, which started well before him, the government regards change under his regime to be glacial. And it’s true. Citigroup is the same Citigroup it’s been for a long time.
There’s also some interesting stuff in here about the government’s “secret” health ratings for banks:
In March, senior officials from the FDIC and Comptoller sparred over the confidential financial-health rating the government assigns to the company’s Citibank unit, people familiar with the matter said. The FDIC wanted the rating lowered, these people say. Banks rated a 4 or 5, on a scale of 1 to 5, are deemed “problem banks,” which means they’re at greater risk of failure.
Government officials decided to keep Citigroup off the “problem” list at the end of March, which became clear after the FDIC disclosed that the 305 banks on the anonymous list had a total of only $220 billion in assets, meaning Citi couldn’t be among them.
Still, Citigroup officials believe that the FDIC will push them onto the “problem” list if they don’t remove Mr. Pandit and his team. They fear being on the list could limit Citigroup’s access to federal programs and prompt trading partners and clients to yank business.