You know what they say about the proof of the pudding -- it's in the eating. The particular pudding to which I refer: Citigroup's (NYSE:C) newly released plans to cut costs, both in the short term and into 2009.

In an announcement that ran a bit long on communications-thwarting corporate gobbledygook, the world's largest financial institution promised to pare down employee positions, move some remaining employees to less expensive locations, consolidate some back-office and middle-office functions, increase procurement coordination, and continue its cuts in "operational spending on technology."

The company expects to take an $871 million after-tax charge in the first quarter of 2007, the results of which will be reported next week. In return, it also expects to generate total expense savings of about $2.1 billion this year, $3.7 billion in 2008, and $4.6 billion in 2009. Citigroup will eliminate roughly 17,000 positions, and move 9,500 employees to less expensive digs.

But the company maintains that this isn't all about cuts. Despite the abovementioned deluge of pink slips, its total employee count will stay steady, thanks to relatively ambitious hiring plans in places like Russia, India, and China. In the latter location, Citi expects personnel numbers to grow in the short term by 25%, albeit from a still relatively low base.

Citigroup Chief Operating Officer Robert Druskin created the program at the behest of his longtime colleague, CEO Chuck Prince. In announcing its specifics, Druskin said, "We have been very careful to maintain our revenue generating capability -- in fact, this effort should enhance our capacity to grow."

The effort was undertaken at the urging of yet another prince -- in this case, Citigroup's largest shareholder, Saudi Prince Alwaleed bin Talal. Along with others inside and outside the organization, Prince Alaweed has been concerned that the company's revenues have grown more slowly than its expenses. Largely as a result, Citigroup's share-price performance has lagged competitors Bank of America (NYSE:BAC) and JPMorgan Chase (NYSE:JPM).

Chuck Prince probably inherited a less healthy organization than generally is recognized from his predecessor, the legendary Sandy Weill, who cobbled the organization together over a decade and a half, before stepping aside in 2003. Nevertheless, Prince is probably on a short leash with his board of directors; I'm betting that he's got a year or so to create meaningful positive results at the company.

I'm personally skeptical about the magnitude of the savings predicted by Citigroup for this year and the two that follow. It's easy to pick apart the plan, particularly since some observers of the company had expected it to cut more than 40,000 positions. All the same, this may be an ideal time for those same observers to eat Citigroup's pudding before they judge it.

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Fool contributor David Lee Smith does own shares in Bank of America, but holds no financial position in the other companies mentioned. He welcomes your questions and comments. The Fool has a disclosure policy.