Rubin to Leave Citigroup; Smith Barney on Block Article By DAVID ENRICH
Robert Rubin, the former Treasury secretary who has been sharply criticized over his role in the financial turmoil at Citigroup Inc., is leaving the bank.
Mr. Rubin is senior counselor and a director at the New York company, which has suffered $20 billion in losses over the past year and got a government bailout of at least $45 billion. Citigroup's troubles cast an awkward spotlight on Mr. Rubin, who received $115 million in pay since 1999, excluding stock options.
Separately, Citigroup is in talks to sell its Smith Barney brokerage and asset-management unit, according to people familiar with the situation. One possibility being seriously considered is a joint venture with Morgan Stanley, these people said. No deal has been reached yet.
As Citigroup directors and executives seek to stabilize the company, they haven't ruled out additional changes to the company's structure or operations, according to people familiar with the situation. Another asset that could be up for grabs is Grupo Financiero Banamex SA, Citigroup's retail-banking business in Mexico, which pumps out big profits for the bank.
Potential suitors could include J.P. Morgan Chase & Co., which would likely would covet Banamex because the New York company doesn't have any international retail operations.
In a statement, Citigroup confirmed Mr. Rubin's exit, saying that he had decided not to stand for re-election as a director at the company's next annual shareholder meeting. Mr. Rubin will remain a director until then.
"Since joining Citi nearly 10 years ago, Bob has made invaluable contributions to the company," Mr. Pandit said in a written statement that was released after The Wall Street Journal reported the departure of Mr. Rubin on Friday afternoon.
"From the beginning, Bob has been instrumental in working with clients around the globe and forging strong relationships for our businesses. He has also been a trusted advisor to senior management as well as to me personally, and I am pleased to say Bob has agreed to continue to be available as a sounding board and resource for me and for the company."
Sir Win Bischoff, Citigroup's chairman, added in a statement: "On behalf of everyone at Citi, I am deeply grateful to Bob for his unwavering commitment to Citi over the past decade and for his personal friendship. We will miss him greatly and wish him well."
While Mr. Rubin has defended his performance since joining Citigroup in 1999, insisting that the bank's problems were due to wider turmoil in the financial system, not failures by Citigroup, he is "tired of it," a person familiar with the matter said. Mr. Rubin now wants to focus instead on his non-profit work and other outside interests.
The exit of Mr. Rubin likely will do little to ease the questions swirling around Citigroup, now just the fifth-largest U.S.-based bank as measured in stock-market value. Since late 2006, Citigroup's share price has plunged nearly 90%. On Friday, the stock was down more than 5% in recent New York Stock Exchange composite trading.
Besides an initial $25 billion injection as part of a broad rescue of financial firms, the government agreed in November to put in $20 billion more and vowed to protect Citigroup against most losses on $306 billion of its assets.
Getty Images Rubin and former Fed Chairman Alan Greenspan visit after a panel discussion, at Georgetown University in March. (Photo by Chip Somodevilla/Getty Images) The second infusion, which the government as the bank's largest shareholder, with a 7.8% stake, coincided with federal regulators putting Citigroup on a tighter regulatory leash, according to people familiar with the situation said.
Federal banking regulators have toughened their scrutiny of Citigroup, becoming involved in internal discussions about the company's strategic direction and discouraging executives from pursuing certain acquisitions.
In an interview with The Wall Street Journal in late November, Mr. Rubin said risk-management executives are responsible for navigating around problems like those now battering Citigroup. "The board can't run the risk book of a company," he said in the interview. "The board as a whole is not going to have a granular knowledge" of operations.
Still, Mr. Rubin was deeply involved in a decision in late 2004 and early 2005 to take on more risk to boost flagging profit growth, according to people familiar with the discussions.
Mr. Rubin also played a major role in getting Mr. Pandit appointed as Citigroup's chief executive in December 2007, following the resignation of Charles O. Prince.
In the Journal interview, Mr. Rubin said Mr. Pandit was doing a good job and would prosper in its current structure once the financial crisis eases.
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<http://online.wsj.com/article/SB123153252017769027.html>
The following is the text of Mr. Rubin's letter to Citi:
January 9, 2009
Vikram S. Pandit Chief Executive Officer Citigroup Inc. 399 Park Avenue, 3rd Floor New York, NY 10022
Dear Vikram:
As we discussed, after a great deal of thought, I have decided to retire as Senior Counselor at Citigroup effective January 9th and not stand for re-election to the board at the next annual meeting. I will continue to do all that I can to help you during my remaining time on the board and beyond.
Let me begin by stressing that I have great respect for you and the job you have been doing in addressing the most difficult financial markets since the 1930s and, in that context, Citi's complicated challenges. You quickly put together a strong management team and, more broadly, you have made and continue to make tough decisions on expenses, asset dispositions, equity infusions, the future strategic direction of the company and in many other areas. Citi continues to have a very special franchise, with many strong assets and many terrific people. There is still a great deal to do, but I have great confidence that Citi will meet the long-term challenges ahead.
When I joined Citi in 1999, the company had two CEOs and faced many strategic and structural challenges. From the beginning, my role, by being advisory, allowed me to act as a sounding board and advisor for the CEOs, senior management, and others, on managerial, personnel, strategic, and structural issues, and on major acquisitions like Schroeders and Banamex. My other role, working with clients and other Citi relationships here and abroad, gave me a keen appreciation of the important place Citi has in the global financial system and global economy.
The last 18 months have been very difficult throughout the financial system, and this has had serious consequences for the employees and stockholders of Citi and affected the people of our country and in countries around the globe. 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. Clearly, there is a great deal of work that needs to go into understanding exactly what led to this situation and what changes, regulatory and otherwise, must now be implemented to reduce systemic risk and protect consumers.
As to Citi, during this period, the company has taken major actions to change personnel, recruit strong people, raise new capital, chart its future direction and much else. Participating in these decisions has given me a very special vantage point on the people of Citi, and I think they have been and are responding with great skill and commitment in a most trying time.
Leaving Citigroup is not a decision that I have come to lightly. As you know, when we officially changed my title six months ago, my first choice had been also to reduce my advisory and client-oriented role. However, after you and I spoke, I decided to continue in those roles as you and your management team settled in and began to implement proactively your program of substantial and important changes at Citi. But now, as you and your team have made the tough decisions I mentioned earlier and established yourselves, the time has come for me to reshape the structure of my life.
As we discussed, as I enter my 70s, and recognize that time is not indefinite, I have been looking forward to deepening my involvement in outside activities and organizations to which I have been strongly committed.
To that end, I intend to intensify my engagement with public policy; for example, the type of activity we have done at The Hamilton Project, where we have charted a more effective way forward in many economic policy areas; at the Local Initiatives Support Corporation (LISC), the nation's largest community development organization, which I have long chaired, which distributed over $1 billion to distressed urban and rural communities last year and which now must work through new strategic challenges in the face of greatly-changed neighborhood and economic conditions; and Kofi Annan's Africa Progress Panel, which has the potential to contribute in special ways to economic development in the poorest continent on the globe. Both of these latter activities reflect my long-standing involvement with the issues around the inner cities and poverty in those cities as well as global poverty more broadly.
Vikram, with all that is now in place at Citi and in our financial system, I think now is the time to move on my earlier plans. I have developed great professional respect and personal regard for you as you have taken on your new and challenging role, and I have great confidence that Citi will emerge from this difficult period successfully and as a great presence in the global economy.
Sincerely
Robert E. Rubin
Cc: Sir Win Bischoff Richard D. Parsons