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In case you missed it, Citi CEO Vikram Pandit resigned unexpectedly last night, along with Citi COO John Havens.
It's rare for Fortune 500 executives to be ousted quite as abruptly as Pandit was. Normally, CEO resignations are effective a few weeks after they're announced to give the executive team ample time to manage the transition. In this case, however, Pandit was ushered out, effective immediately, by Citigroup's board of directors. You have to wonder if the board knows something we don't that led them to usher Pandit out the door so quickly.
So why should consumers care about corporate intrigue at Citi?
If you're a Citi checking account holder, you probably won't notice much difference between Citi run by Pandit and Citi run by his successor, Michael Corbat.
But turmoil at Citi may not bode well for the health of the U.S. banking industry, or the economy generally. Since the financial crisis, Citi has been one of the more troubled of the banks considered "systematically important" by regulators. The fact that it's still struggling enough to stage a late-night defenestration of the CEO tapped to turn it around suggests that it's still in a vulnerable position even after a massive government intervention and three years of steady, if not spectacular, economic recovery.
Here are the reasons being offered for Pandit's ouster, all of which are connected in some way to the bank's continued struggles to move past the financial crisis.
- Seemingly never-ending write-offs of damaged assets, this time involved with the sale of the investment bank Smith Barney.
- The Federal Reserve rejecting its plan to raise dividends to shareholders, because doing so would have caused it to fail a Fed stress test.
- Citi having its credit rating downgraded by Moody's in June.
But Citigroup's shareholders aren't the only ones negatively impacted by the bank's inability to recover. A bank in the process of repairing its balance sheet is going to necessarily be stingier with consumer lending than it otherwise would be, making it less likely consumers will be able to get a mortgage, a credit card or an auto loan from that institution. When a bank as large as Citi continues to clamp down on credit, Americans will feel it, and it's doubtful Pandit's ouster will change that.
What do you think? Was Pandit's firing justified? What does it say about the U.S. banking system?
Follow me on Twitter: @ClaesBell
