Numerous sources report that the resignation of Citigroup's top management on Tuesday morning was a purge, despite ousted CEO Vikram Pandit's multiple interviews later in the day, in which he claimed that he chose the right time to leave, etc. Pandit and president John Havens, what was sometimes called the "Morgan Stanley group" running Citigroup, left with immediate effect, with their departures announced by the Board of Directors after the fact.
The ousting followed a number of developments: Citigroup's stock value falling to a full 90% below its level of 2007 when Pandit took over; the Federal Reserve ordering the bank in June not to pay out a dividend proposed by Pandit, because of its precarious capital (over-leveraged) position; Citigroup having arranged more than $70 billion of collateralized loan obligations in the U.S. this year through September, three times as much as the same period in 2011 and more than any other lender, according to Bloomberg data. The bank has has also been catering to money-market funds, rapidly blowing up its derivatives book, and other activities that crashed in 2007-08.
In addition, Pandit, a former hedge fund manager, had come under brutal, repeated print and interview attacks by former FDIC Chair Sheila Bair in recent weeks over unnecessary bailouts and cluelessness about retail banking; those attacks also slammed Treasury Secretary Tim Geithner as Pandit's protector and bailout champion.
Bank analyst Christopher Whelan of RealAnalytics, who had reported the previous day that the purge was coming, noted that "Sheila Bair, in her new book, reported she was ready to shut this bank down" but was overruled by Geithner and Ben Bernanke's insistence on multiple bailouts. "Citigroup hasn't had a banker at the top for a long time." Whelan characterized the firings as "very disorderly", and said, "The big banks are going to break up." Conservatism is carrying the day in the Board, he suggested, meaning more commercial assets in the United States, fewer assets in all the "emerging markets" securities and derivatives markets, where Charles Prince and Vikram Pandit had taken it.
The newly announced CEO, however, is Michael Corbat, another investment bank veteran (Salomon Brothers). But Corbat since 2010 has been in charge of "Citi Holdings" (i.e., chunks to be sold off and gotten rid of, most recently the Smith Barney brokerage). The shedding of subsidiaries to raise capital is likely to accelerate.