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Why Citi was forced to keep Pandit

Source: PTI
November 26, 2008 11:57 IST
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Vikram Pandit may thank the TINA (There Is No Alternative) factor for still being in job as Citigroup CEO, as the US government reportedly did not push for his ouster in its rescue package for the troubled bank partly because there was no "obvious" successor.

In the run-up to the federal rescue plan that guaranteed $306 billion of toxic assets of Citi and multi-billion dollar capital infusion in lieu of shares, media was rife with the reports that Pandit was on the verge of losing his job as he had failed to deliver on the mandate to revive the bank.

A day after the mega rescue plan, it has now come out that the authorities discussed whether to replace Pandit as Citi CEO, but there was a disagreement over the issue.

A report from the US business daily Wall Street Journal, which has said that the name of American Express CEO Kenneth Chenault had emerged as a possible replacement, said that the federal officials had a disagreement on whether Pandit was at fault for the company's problems, while debating the structure of the rescue plan for Citigroup.

Separately, British daily the Financial Times reported that the US regulators during their talks have decided against Pandit's replacement as they could not find an obvious successor for him.

The report quoted a participant from the discussions as saying that, "if there was an obvious choice for a replacement for the chief executive officer that would have levered up the benefit of the package...but there was no obvious queue of candidates."

Further the WSJ report stated that, Pandit may not be in an immediate danger of losing his job as the government did not push for his ouster as part of the agreement, as it did with the CEO of American International Group when it bailed out that company.

Till a few weeks ago, Citi was being considered among the last ones standing in the world's biggest economic crisis in the recent times and Pandit was even being commended for successfully turning around the bank.

But a sharp plunge in its share price over the past week to below four dollars, which wiped off more than half of the company's valuation, re-ignited the concerns about the bank's financial health and reports started surfacing that the board and investors wanted Pandit out of his corner room.

A number of media reports suggested that Pandit was looking at selling the entire bank, or dis-assemble it into pieces to be sold out separately, in his efforts to revive the once-most-valued financial institution of the world.

However, the state-sponsored bailout of the battered Citigroup has not only dispelled the doubts about the very existence of the financial services giant but also put to rest questions on the continuation of its India-born chief Vikram Pandit.

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