Rubin Retires as Citigroup Counselor, to Leave Board (Update2)
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By Joshua Fineman
Jan. 9 (Bloomberg) --
Robert Rubin, the former Treasury Secretary who advised Citigroup Inc. as it lost $20 billion in the subprime mortgage crisis, resigned his position as senior counselor and won’t stand for re-election to the board.
Rubin, 70, intends to “deepen his involvement in outside activities and organizations to which he has been strongly committed,” the New York-based bank said today in a statement. Separately, Citigroup and
Morgan Stanley are in talks about merging their brokerage units, CNBC reported.
“My great regret is that I and so many of us who have been involved in this industry for so long did not recognize the serious possibility of the extreme circumstances that the financial system faces today,” Rubin said in a letter to Chief Executive Officer
Vikram Pandit.
Rubin, who served at the Treasury’s helm from 1995 to 1999 under President
Bill Clinton, has faced criticism from investors including Smith Asset Management’s
William Smith for collecting more than $150 million in pay in a decade while failing to steer Citigroup away from subprime mortgage securities. The investments led to four straight quarterly losses and prompted the bank to turn to the government for a rescue package.
Citigroup, the biggest bank recipient of U.S. bailout funds, completed an agreement for a $20 billion government investment, on top of an earlier $25 billion injection and a U.S. guarantee on $306 billion in troubled assets.
‘Challenged Situation’
Rubin’s departure is “not a huge surprise,” said
Michael Holland, chairman and founder of New York-based Holland & Co., which oversees $4 billion. “It’s been a challenged situation for a long period of time.”
Pandit, 51, is cutting 52,000 jobs worldwide and expects “major challenges” to continue into 2009, he said Dec. 31.
“Since joining Citi nearly 10 years ago, Bob has made invaluable contributions to the company,” Pandit said in the statement.
In the letter to Pandit, Rubin said he had “great respect for you and the job you have been doing in addressing the most difficult financial markets since the 1930s.”
“There is still a great deal to do, but I have great confidence that Citi will meet the long-term challenges ahead,” Rubin said.
Citigroup’s 77 percent decline in New York Stock Exchange trading in 2008 made the stock the worst performer in the 24- company KBW Bank Index for the second year in a row. Today the shares fell 41 cents, or 5.7 percent, to $6.75 as of 4:02 p.m.
Citigroup and Morgan Stanley may merge their brokerage units in a joint venture that would include a payment from Morgan Stanley, CNBC reported, citing unidentified people.
Morgan Stanley, which has about 8,000 brokers, would hold the larger stake in the venture, which would become the biggest such firm in the U.S. with the addition of 11,000 brokers from Citigroup, CNBC said. Bank of America Corp., which bought Merrill Lynch & Co. on Jan. 1, has about 15,000 brokers.
To contact the reporter on this story:
Joshua Fineman in New York at
jfineman@bloomberg.net.
Last Updated: January 9, 2009 16:06 EST
