Last month, the Obama administration infuriated many when it gave then-General Motors (NYSE:GM) CEO Rick Wagoner the boot. "Make no mistake," said my Foolish colleague Rich Duprey, "this is as clear-cut a government seizure of a private-sector business as any of the actions recently taken."
And it was. While the Treasury is keeping GM afloat via credit lines, it isn't a shareholder (yet), and thus it shouldn't have any voting power. Now, some might argue the Treasury didn't force Wagoner out, but simply insisted that it would stop supplying capital if he stuck around. Either way, when Uncle Sam starts calling the shots, investors lose all faith in the enterprise. As they should.
Enter Citigroup (NYSE:C). With the Treasury set to convert $25 billion of preferred stock into common stock, Washington is about to gain legitimate authority to swing its axe and make high-level decisions.
The first order of business? Showing CEO Vikram Pandit the door.
The New York Post reports that U.S. regulators may remove Pandit once the stress tests are completed, largely just to show the market it means business, and to appease pitchfork-wielding taxpayers. The test results are scheduled to become public May 4, so perhaps we'll know by then.
Is this management shakeup warranted, or is Pandit just a poor scapegoat? Weigh these two big factors together:
- Pandit was brought on in late 2007, and hence had nothing to do with the colossal failure that turned Citi into a $2 trillion hand grenade.
- Even so, he mostly sat on his hands and waited for things to get better until the bank finally blew up last fall, leading to no less than three bailouts in as many months. "Too big to fail" had been a household phrase for more than a year before Pandit finally decided it was time to break the bumbling giant apart.
In addition, Citi is actually Pandit's first attempt at big-league banking. He's a former hedge fund manager who spent the bulk of his career in sales and trading. While he's a smart guy (with a Ph.D. in finance, no less), Pandit doesn't have nearly the commercial banking experience his peers at JPMorgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC), or Bank of America (NYSE:BAC) do. (Not that experience led the latter to success, mind you.)
Rather than fuss over Pandit's potential ouster, it might be more relevant to wonder why he ever got the job in the first place. You can't be expected to coach the Super Bowl when you've barely led a Pop Warner game.
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