Citigroup ‘went wrong’ on realty: Vikram PanditNovember 26th, 2008 - 2:10 pm ICT by IANS
New York, Nov 26 (IANS) Virtually blaming the previous management for the mess within Citigroup Inc, its Indian-American chief executive Vikram Pandit said its unchecked exposure to the US realty industry led to the present crisis.”We got here by lending money, and putting money to work in the US real estate market in a size that was probably larger than what we ought to have done on a diversification basis,” Pandit told the popular “Charlie Rose Show”.
“What went wrong is we had tremendous concentration in the sense we put a lot of our money to work against US real estate,” he said, hours after Citigroup was able to secure a $20 billion bailout package from the US government.
“It’s a lot easier to get into these situations than it is to get out of them.”
Terming the current financial and banking crisis as unprecedented, he said: “It was about confidence in the financial system. It was about stability of the financial system. It really was about the US banking system.”
Pandit also recollected the defining moments of the tumultuous weekend when Citigroup was on the verge of collapse but managed to convince the US government to help it overcome the crisis on account of the $306-billion portfolio of risky assets, troubled loans and mortgages.
“The real question over the weekend was of confidence in the financial markets, confidence in the banking system and creating stability in the financial market, stability for the US banks,” he said.
“We raised capital from the government and we actually bought insurance from the government,” Pandit said. “When your risks are that large you can’t go to Aetna, you have to go to the government.”
According to him, a lot of right things had been done to tide over the crisis in the US financial system, but not everything that was being done has worked.
“Financial institutions found themselves with more assets than they should have. All of them want to de-leverage, not put on more loans.”
Asked about the future of the Citigroup, Pandit said it was going to be a global banking financial institution thanks to its presence in 109 countries. “We will emerge as a high-end retail bank,” he said.
“We’re going to be a bank that does the basics - help people save by taking deposits, help people borrow by lending money, provide them investment ideas, provide them advice, and provide them payment services.”
He said Citigroup had given up a lot of its businesses and would get rid of some more over time to streamline the business operations, adding the bank needed a strong treasury, a strong chief financial officer and a strong chief executive.