Look forward and move on: Vikram Pandit

Vikram Pandit

The Citigroup Inc Chief Executive, Vikram Pandit’s first extensive TV interview since the crisis. Excerpts of the interview held on the PBS' Charlie Rose show.

Charlie Rose:How do you size up the president's economic team?

Vikram Pandit: I like it. I think it's one of the best teams one could put together. I've known Larry Summers somewhat. He is a very smart man. He is experienced. He actually is very good at looking through a lot of details and coming up with a theory. Tim Geithner understands theory and practice. He's a doer. And, unfortunately, he's had a lot of experience in dealing with some of these things over the last six months. So it's good to have him. It's good to have Larry.

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Why’s the Citi stock collapsing? And was there a run on Citibank? And why did you feel it was necessary to say we need to do something about short selling?

There is no doubt that a lot of banks have come into this market with assets and securities that they wish they hadn't had. These are loans, loans that they make. And in a tough market, they are challenged loans. And we knew that. We had those on our balance sheets.

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And we did everything we could to make sure we raised the right amount of capital. We raised a lot of it. We cut our cost structure correctly and had a plan. We do have a plan to make sure that as we get out of these assets, the company starts making money. What happens, though, occasionally, is that in a market where there is a lot of fear, there are issues that come up occasionally about what about this bank? What about that bank? We're not the first ones.

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As you know, this has happened to other banks along the way. And our fear and was that 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. And we thought that this was an issue about confidence in Citi, not about capital, not about – not about our earnings. And somehow, we needed to make sure that we got control of the situation.

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And you lost, in a week, 50 per cent of your value?

We did indeed. The stock price went down about 50 per cent in a week. And so I think it was important, as we all talked that we got ahead of this. And that's certainly what happened over the weekend.

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Why do these things always take place on the weekend?

Charlie, that's good question. I guess one answer is the markets are closed, and gives you an opportunity to really think through what needs to get done. You can get it done, put it in place, and by the time the markets open, you can announce it.

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But not a significant number of people of significant wealth coming saying I'm worried about Citibank, I have seen the stock collapse, and we better get our deposit out of there?

That's right. That's right, and so, you know, from that perspective, again, with 300,000 people around the world knowing exactly the strength of the bank, we did a pretty good job of making sure we had informed our clients about the strength of Citi. So, really the view was going into the weekend, what could happen this coming week that we're in.

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So you knew you had a crisis, and the credit crisis of confidence that made go beyond Citibank, and you had to do something?

When you look at the announcement that came out, and it was a joint announcement by the FDIC, the Federal Reserve, and the Treasury. It talks about Citi, but it also talks about a lot of different things. It talks about how all the regulators and the treasury, everybody, is going to stand behind the US financial system.

And was about making sure people understood that all measures, all resources available to us would be used to make sure there was not an issue of confidence in the US financial markets and the banking institutions of the US financial markets. That was, to me, the major part of the announcement. Obviously, given where we were at Citi, with where the stock price was, just an announcement, we're okay. I mean it could have worked, but it was really important to say, you know, we should go a little bit above and beyond kind of what it might take.

After Citi, is Bank of America next?

Clearly, as the world's largest financial institution at one time, you were too big to fail. Is Citi too big to manage?

It's not too big to manage. Let's talk a little bit about Citi. You're bringing up a question about Citi. What's unique about Citi is that we're in 109 countries around the world, which means we bring the world to our clients and our clients to the world.

We're helping the world globalise. It's a very unique place to be and probably exactly the place to be, given what's happening around the world, globalisation, trade flows, capital flows, everything increasing per se. With those 109 countries come the requirement to operate the company in exactly the right way. And what we were of course doing and I have been doing over the last 11 months is saying, okay. That's what we're good at. How do we do that as well we can and clean up the rest? And so we sold about 16-18 businesses so far. I've got a long list of things we're cleaning up.

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Risk management at Citi seemed to have gotten out of control. Will you accept that?

I do consider the role of the CEO as that of a risk manager. I'll take that. That is my role, very clear about that. But let's think about risk management.

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Is the US government becoming the world's bank?

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Will anything change because of what's happened in this economic collapse? What will be different?

I think that's the debate. What is going to be different? Because let's think about where we are. We went from a funding architecture for banks and financial institutions, which was a completely free market, funding architecture to where the funding markets have basically been withering away, and the central banks around the world have had to step in and help fund financial institutions. We're all going to have to get out of that on the other side. And when we get out of that on the other side, the question is, what's the architecture of the financial system?

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What do you think the shape of that funding architecture ought to be?

Well, I think deposit bases are going to be important as a source of funding. I also think that because of the deposit base architecture being important.

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Let me talk about your confidence. That you have identified all these toxic securities?

That's where I am. That is – when we looked at all the assets we own, and really, this is not about the operating business. The operating business is doing extremely well.

As a matter of fact, with the efficiencies we've put in place, we're doing even better than we did 11 months ago by a lot. It's not about the footprint, it's not about the operating business. Those earnings are coming in. As a matter of fact, just the quarter that ended, our business revenues were exactly the same as they were one year ago, despite the challenging market, which means people are doing a great job at developing and helping clients to develop business revenues and my cost structure is going down. So my question is really, as you said, all about the assets. And the loans that I made. That were made before I got there.

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Tell me what it was like to be in the middle of the storm?

You're right. There is not an owner's manual of how to deal through this kind of an event or this kind of a market.

Isn't that appropriate to ask explanation and apology for what's happened?

And I can completely understand how people on Main Street, people who are not close to this industry would be furious at what's happened and furious at kind of where we've gotten to.

And in lots of different ways, that's affected, and it's affecting them. And their housing prices are down. Their nest eggs are down. 401-Ks are down. Their college saving plans are down. I mean, there is a lot that's going on, which is something that would make me extremely furious.

There is seemingly little accountability on the part of management?

The most important thing to do is to make sure that we have a plan for going forward. And the plan includes a lot of different things, but it starts with confidence. And there are some managements that have already gone. There are some managements that may go. If you start throwing everybody under the bus, we're going to need a very large bus. Given what we have gone through, the most important thing is who can do the job going forward.

And who makes that decision?

I think that decision has to be made depending upon the circumstances you're in, depending upon what institution it that is you need to run, and depending on what kind of skills and capabilities somebody needs to have to get it done.

What are the lessons you have learned? And what do you regret?

It's been 11 months since I took over the company. I built a great team around me. We didn't like everything we came into this market with, whether it's the loans that we had made or some of the businesses we were in. And we moved really fast. What this market tells you is one should have moved even faster.

And I keep thinking about it, is there something else I could have done sooner than what I did. And I always wanted to do things that you can think about that one could have done sooner. But the most important thing is that it's very, very important to look forward from where we are and acknowledge we still have a lot of work to do feel we need great teams. We need great people who are willing to work hard, who are smart, talented in their own way, dedicated to saying that this is an unprecedented market time we're going through, and that we need to do a lot of hard work to figure out how to get from here to there.

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And you are confident that we can get there?

We, as a country, have no choice. We as Citi will get there.

Credit: Charlie Rose

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