Sunday, October 07, 2007
Robert Rubin, a former U.S. Treasury secretary
"This was sudden and steep," said Robert Druskin, Citigroup's chief operating officer, referring to the market downturn. "We had to make sure that all the parts of the company were on the same page."
As the weeks wore on, Citigroup's problems grew more serious.
Prices of subprime mortgage bonds and other complex securities were deteriorating rapidly, sweeping up Citigroup and most of its competitors into a financial crisis.
On Aug. 8, a day after the U.S. Federal Reserve Board decided against lowering interest rates, Rubin made a phone call to Ben Bernanke, the Fed chairman, to compliment him on the decision, according to a person familiar with the call.
Although Rubin's interactions with U.S. regulators have drawn scrutiny in the past, this person said that Rubin acted "on his own behalf and not on behalf of Citigroup." This person also said Rubin made the call out of concern that a rate cut might encourage reckless behavior on Wall Street.
As Citigroup's longtime bond-trading engine continued to sputter, its lending units faced swaths of souring mortgages. The bank was on the hook for billions of dollars' worth of huge buyout loans that few investors wanted, and its core consumer banking business was strained.
It also became increasingly clear that Prince, for the fifth time since taking the reins as chief executive, would have to disclose a major problem to his board.
Last Monday, the dimensions of the bad news became public: Citigroup warned that it planned to take a $5.9 billion write-down in the third quarter, a move that would cause its profit to plunge about 60 percent.
click on the heading for the rest of the article
As the weeks wore on, Citigroup's problems grew more serious.
Prices of subprime mortgage bonds and other complex securities were deteriorating rapidly, sweeping up Citigroup and most of its competitors into a financial crisis.
On Aug. 8, a day after the U.S. Federal Reserve Board decided against lowering interest rates, Rubin made a phone call to Ben Bernanke, the Fed chairman, to compliment him on the decision, according to a person familiar with the call.
Although Rubin's interactions with U.S. regulators have drawn scrutiny in the past, this person said that Rubin acted "on his own behalf and not on behalf of Citigroup." This person also said Rubin made the call out of concern that a rate cut might encourage reckless behavior on Wall Street.
As Citigroup's longtime bond-trading engine continued to sputter, its lending units faced swaths of souring mortgages. The bank was on the hook for billions of dollars' worth of huge buyout loans that few investors wanted, and its core consumer banking business was strained.
It also became increasingly clear that Prince, for the fifth time since taking the reins as chief executive, would have to disclose a major problem to his board.
Last Monday, the dimensions of the bad news became public: Citigroup warned that it planned to take a $5.9 billion write-down in the third quarter, a move that would cause its profit to plunge about 60 percent.
click on the heading for the rest of the article
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