There's always been something a little curious about Vikram Pandit. He's a former economics professor who sold his hedge fund to Citigroup (NYSE:C) in 2007. The fund faltered and was shuttered soon after. When Citigroup itself began to crumble, the board of directors decided to make Pandit CEO of the entire company. You know the saying: When a crisis hits, find an inexperienced leader of an ill-fated acquisition and put him in charge of the ship.
Pandit resigned from Citigroup yesterday. He says the decision was his own. Others say the board asked him to leave. We'll probably never know, but it doesn't matter. He's out.
Here's what's clear: Pandit had nothing to do with Citigroup's downfall. The toxic CDOs, the multibillion-dollar losses, the bailouts -- all of those seeds were planted before he arrived. Pandit was one of the only bank CEOs in 2008 who could claim that none of the mess was his doing. He was just the clean-up crew.
And despite being wet behind the ears, Pandit actually did a good job cleaning Citigroup up. Citi teetered on the brink of collapse in early 2009, even after two rounds of government bailouts. But then, things turned. Pandit cleaved the company into two internal units -- basically, a good unit and a bad unit -- and began selling the bad unit's assets. For the most part, it worked. Citigroup has been profitable in 13 of the last 14 quarters. Taxpayers have been repaid for bailout funds. In the second quarter, the bank had the highest tier 1 capital ratio it's ever seen. The bank isn't back to its former self, nor should it strive to be. But it's stabilized -- exactly what Pandit was brought on to achieve.
But Pandit never gained the kind of respect or trust that other bank CEOs commanded, even during the financial crisis. During a 2008 conference call with other CEOs, Pandit asked a technical question related to JPMorgan Chase's (NYSE:JPM) purchase of Bear Stearns. "Who is this?" barked JPMorgan CEO Jamie Dimon. The Wall Street Journal explains what happened next:
Mr. Pandit identified himself as "Vikram." Offended that Mr. Pandit was taking up time with what he considered granular inquiries, Mr. Dimon shot back, "Stop being such a jerk." He added that Citigroup "should thank us" for staving off further mayhem on Wall Street.
And former FDIC chairman Sheila Bair filleted Pandit in her recent book, as chronicled by the Observer:
- "I thought Pandit had been a poor choice ... he was a hedge fund manager by occupation and one with a mixed record."
- " ... couldn't we at least bring in an experienced commercial banker to run the place?"
- " ... wouldn't have known how to underwrite a loan if his life depended on it."
- "I doubted that many senior commercial bankers would be willing to work for Vikram, given his weak reputation."
- " ... he was also boasting that at some point it would start paying dividends again. We had laughed those stories off as delusional."
- " ... no private investor was likely to invest in Pandit's bank."
Daniel Gross wrote yesterday in the Daily Beast: "Four years after the depths of the crisis, perhaps Citi's board realizes it needs a professional, seasoned manager to run the company."
Perhaps. But, look: Pandit actually did a decent job over the last five years, while every megabank that drove itself into the ground in 2008 was run by a "seasoned manager." Experience can be wrongly valued over actual performance. Citigroup shareholders should hope that's not the case here.