Citi rescued to ’keep America’s strength’

Bloomberg

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"We’re in 109 countries around the world, and Citi’s strength is viewed to be America’s strength in many ways," Pandit, 51, said in an interview with PBS’s Charlie Rose show that aired Tuesday. The bailout "was really about the entire financial system. It was about confidence in the financial system. It was about stability," he said.

Citigroup’s stock last week fell below $5 for the first time since 1994, sparking concern that customers might pull their money and destabilize the New York-based bank, which has $2 trillion in assets. The government on Nov. 23 agreed to support the company with a $20 billion capital injection and a shield against losses on $306 billion of mortgages and other loans.

Pandit, who took over as Citigroup’s chief 11 months ago, was making his first public comments since the deal with the government was announced. The guaranteed assets had a face value of about $340 billion to $350 billion, he said, before they were written down amid the credit crisis.

All banks have experienced declines in the value of their loans and securities partly because so many of the assets are being dumped into the market at the same time, he said.

"Some of them are toxic, some of them are good," Pandit said. "There is just too many of them. And there has to be a plan to clean out these assets and have institutions and/or funds buy them, and the Treasury has been working on them."

Criticism
Citigroup’s deal, which followed a $25 billion infusion from the Treasury in October, drew criticism from U.S. legislators including Senate Banking Committee Chairman Christopher Dodd. The government should have struck a better deal and insisted on management changes, Dodd said Tuesday.

The bank has reported four straight quarterly losses totaling $20 billion. The stock price plunged as low as $3.77 a share on Nov. 21. Since the government pledged its support, the stock has rallied 61 percent to close Tuesday at $6.08 in New York Stock Exchange composite trading.

"Some of the issues about Citi’s assets and asset quality were being translated into people taking action on the stock, not only some people who had stock they were selling, but particularly short sellers," Pandit said, referring to investors who try to profit from betting on a stock’s decline.

Pandit, who was chosen as CEO after the ouster of Charles O. "Chuck" Prince, laid blame for the year of losses and decimated stock on prior management’s housing-related investments.