| In my November 2008 column, I mentioned that at the IMF meetings I had overheard Vikram Pandit sounding very upbeat. "I wonder if Pandit is an extremely optimistic person or in a cocoon of senior management denial?" I wrote. Subsequently, an interesting Citi document crossed my desk entitled "Town Hall Podium copy speaking notes". These were the notes for a speech that Vikram Pandit gave to employees on Monday, November 17 2008. "Exactly one week ago, our companys leadership group got together to take stock of your accomplishments in 2008," the document starts. "We walked away with a clear sense that we are entering 2009 in a strong position, much stronger than we entered 2008... Everyone walked away enthusiastic."
Later in the speech Pandit claims: "We have spent the last year getting fit... and are in a strong competitive position... We will be the long-term winner in this industry." There then follows a homily on banking that would make even a five-year old child cringe: "As I said, we are a bank. What does a bank do? A bank takes deposits and puts them to work..." And Citis chief concluded with a flourish: "Lets show the world what we can do!" One week later, Citi was effectively bailed out by the US Treasury after a 70% drop in its share price during the month of November. Perhaps "cocoon of senior management denial" was an understatement.
Of course, Pandit did not join Citi until April 2007, so he cannot be held responsible for all of the banks woes. Most of the murky sub-prime mortgage assets and leveraged loans were accumulated under his predecessor, Chuck Prince, and co-head of investment banking Tom Maheras. To date, Citi has taken more than $60 billion of write-downs and credit losses across its businesses.Another man who had a senior role at Citi for many years was Robert Rubin, president Bill Clintons Treasury secretary. Rubin joined Citi in 1999 as a director and chairman of the executive committee of the board. He is now what is described as a senior counsellor. As Citi was lurching towards meltdown during the weekend November 21, the New York Times published an article entitled: "Citigroup saw no red flags even as it made bolder bets". The article was critical of Rubin, stating that both he and Prince had "played pivotal roles in the banks current woes by drafting and blessing a strategy that involved taking greater trading risks to expand its business and reap higher profits". A few days later I was amused to read a letter to the editor of the New York Times from Lewis B Kaden. Kaden, who until then I had never heard of, is a vice-chairman of Citi and has an impressive curriculum vitae. Devoted readers will know that I despise the vice-chairman title, which is normally handed to those who have no power or management responsibility in an organization. Kaden wrote that "[Rubin] was never an architect nor was he a drafter of Citigroups risk-taking plans and had no operating role". Kaden continues: "Based on my experience, Bob has been an advocate for expanding business opportunities premised on four conditions: careful risk reward judgements, having the right people in place, having the right technology in place and appropriate oversight."
I could have come up with those criteria. Citi paid Rubin tens of millions of dollars during the past decade. Surely the firm was entitled to more detailed and insightful advice on such an important topic? I remain intrigued as to the authorship of the letter. Given that Rubin was being savaged, why did he not respond himself or ask Citis chairman, Sir Win Bischoff, or chief executive Pandit to spring to his defence? One of lifes little mysteries, I guess. What do you think?
Those of us involved in finance tend to treat the vagaries of investment banking as a matter of life and death. But sometimes an event happens that makes market meltdown seem insignificant. In late November 2008, terrorists attacked various high-profile targets in Mumbai, including the famous Trident-Oberoi hotel complex. Nearly 200 people were killed and hundreds more injured.
I discovered to my consternation that my first City boss, Kevan Watts, was caught up in the atrocities. Watts, a former co-head of global investment banking at Merrill Lynch, is now president of DSP Merrill Lynch in India. Watts is one of those understated Englishmen blessed with a first-class mind, a strong sense of irony and sack-fulls of sangfroid. Think: a grey haired James Bond turns his hand to investment banking. Kevan walked through the Oberoi hotel lobby 10 minutes before the terrorists attacked it and went to his room to join a conference call. "Once I heard the explosions, I realized what was happening," he told me. "I barricaded myself in my room using a sofa, turned the lights down low and the air conditioning up high in case we lost power and charged my Blackberry. I was there for 26 hours. I had a small pack of digestive biscuits which I decided to ration and when I was released I still had six digestives left.
"But Kevan," I spluttered, "werent you terrified you would be killed?" Watts was phlegmatic. "Not really," he said. "After the first few hours, I assumed that I would be OK. Of course the risks were a lot higher than a normal day in the office! But I had a constant flow of Blackberry and SMS messages. Many survivors had far worse experiences and so many families lost loved ones for ever." And you thought "grace under pressure" was a phrase someone coined to describe dealing with office politics?
Finally, as 2008 hobbles out, I ponder who were the heroes and villains of those terrible 12 months. My nominations are listed in no particular order as it is sometimes difficult to distinguish within the ranks of deities and demons, which is why some luminaries appear in both lists.
I would like to end on a cheerful note. A mole reports attending a wonderful birthday party in London thrown by Michael Hintze, legendary founder of the CQS hedge fund. Mole says that Hintze welcomed guests and reminded them that the party was planned in 2007 and paid for in 2007. "Ridiculous," snorts a commentator. "Why shouldnt Hintze have a birthday party if he wants? All this sackcloth-and-ashes attitude is getting me down. Rich people should spend. Isnt that what Keynesian economics dictates?" Mole also reports bumping into Prince Charles at the party. As the tentacles of the credit crunch stretch out everywhere, it is good to know that Her Majesty the Queen has decreed that the royal household must economize. The value of individual Christmas presents is to be capped at £50 and leftovers are to be served on Boxing Day. Leading by example seems to be the philosophy of the day.So how was your month? Please send news and views to email@example.com.