Posted on 11/30/2016 11:58:16 PM PST by Freedom of Speech Wins
Citigroup Charades
One big bank that remains squarely in regulators’ gun sights is Citigroup, and for good reason. The present firm resulted from the merger of Citicorp and Travellers in 1998. Vikram Pandit left Morgan Stanley in 2005 after being passed over for CEO and, with two colleagues, started a hedge fund, Old Line. It was sold to Citigroup in 2007, right at the top of the financial bubble, for $800 million. Even though that hedge fund was not very successful and eventually closed, Pandit rose to be CEO of the firm in December 2007.
On his watch, the company’s stock continued its collapse from what would have been $564 per share in December 2006, except for the 10-to-1 reverse split in May 2011 to avoid the embarrassment of its selling at penny stock prices (Chart 10). The swoon to the trough in March 2009 was 98.2%.
Pandit’s relations with regulators were poor and he didn’t help matters by letting the bank consider completing the purchase of a private jet after receiving $45 billion in TARP bailout money. Despite his announcement to the Citigroup directors that all was well with regulators, the bank failed the Fed’s stress test in 2012. So it was not allowed to increase its quarterly dividend from one-cent per share to five cents and it requested but could not buy back up to $6.4 billion in stock. Shareholders were not amused and Pandit was shown the door in October.
Pandit told Congress in February 2009 that “my salary should be $1 per year with no bonus until we return to profitability.” After some improvement in the bank’s finances, he was awarded a $23.2 million retention package in 2011, close to the top of CEO compensation. Nevertheless, in April 2012, 55% of shareholders voted against increasing his pay to $15 million, the first nonbinding rejection of a compensation plan by a major bank.
History Repeats
In a repeat of history, last March the Fed again said Citigroup flunked its stress test, only the second bank along with Ally Financial to fail twice. So it can’t raise its quarterly dividend from one-cent to five cents per share.
It wasn’t the quantitative part of the test that tripped up Citigroup. Its Tier 1 capital ratio would only fall to 7% under very adverse conditions, still well above the fed’s 5% minimum. That adverse scenario, specified by the Fed, includes a deep recession with leaping unemployment, a steep decline in house prices and a 50% plummet in equity prices. Also, in the third annual stress test, the Fed made its own projection of the bank’s balance sheet, assuming the assets rise during tough times rather than fall as banks had assumed, so more bank capital would be necessary. In addition, the Fed forced eight big banks to assume the default of their largest counterparty.
The Fed this year flunked Citigroup on the quantitative side of the stress test. It cited deficiencies in Citi’s capital-planning process and risk assessments. The Fed had earlier warned the bank about these problems, but received an inadequate response. In effect, the Fed is questioning whether Citigroup is too big and too complex to manage without posing systemic risk.
Pay to Play Crony Capitalism.
Pandit’s Old Line Partners Hede Fund lost at least $ 200 Billion dollars: http://hf-implode.com/imploded.html
Sam Israel’s fraudulent firm Bayou Hede Funds and Citibank being sued here: http://securities.stanford.edu/filings-documents/1035/BHFE05_01/200636_o01c_0501762.pdf
Should read Hedge Funds.
More on Sam Israel’s Hedge Fund shenanigans: http://www.nytimes.com/2005/09/17/business/clues-to-a-hedge-funds-collapse.html?_r=2
Money going offshore from Bayou Hedge Funds: http://www.institutionalinvestor.com/Article/1022263/Two-Weeks-Of-Twists-And-Turns-In-The-Bayou-Saga.html#/.WD-EU9Q76rV
Bayou also cleared through Goldman Sachs.
Goldman Sachs’s fine: http://riabiz.com/a/2010/11/18/an-ria-that-paid-the-price-for-falling-for-the-bayou-scam-speaks-out
Hedge Fund pioneer E. Lee Hennessee who apparently informed on Israel and Marino when she caught on to something being amiss passes: http://www.gossipextra.com/2016/10/30/lee-hennessee-found-dead-trump-plaza-west-palm-beach-6459/
More on E. Lee Hennessee upstanding citizen and Sam Israel non-upstanding citizen: http://www.nytimes.com/2016/11/04/business/dealbook/e-lee-hennessee-died-hedge-funds.html
Is Pandit looting education money now with his TGG Consulting? https://en.m.wikipedia.org/wiki/TGG_Group
Helps to have Rahm Emanuel and Hillary as pay to play "friends" I guess.
Madoff donating to liberal Democrats: http://www.freerepublic.com/focus/f-news/3500137/posts.
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