To the extent that they existed, they were fatally compromised by conflicts of interest. Here’s a nice anecdote on the firm’s risk-management chief, David Bushnell, palling around with fixed-income executives—people he was supposed to be reining in:
One of Mr. Maheras’s trusted deputies, Randolph H. Barker, helped oversee the huge build-up in mortgage-related securities at Citigroup. But Mr. Bushnell, Mr. Maheras and Mr. Barker were all old friends, having climbed the bank’s corporate ladder together.
It was common in the bank to see Mr. Bushnell waiting patiently — sometimes as long as 45 minutes — outside Mr. Barker’s office so he could drive him home to Short Hills, N.J., where both of their families lived. The two men took occasional fly-fishing trips together; one expedition left them stuck on a lake after their boat ran out of gas.
Because Mr. Bushnell had to monitor traders working for Mr. Barker’s bond desk, their friendship raised eyebrows inside the company among those concerned about its controls.
And Rubin comes in for a lashing here, as well he should:
Problems with trading and banking oversight at Citigroup became so dire that the Federal Reserve took the unusual step of telling the bank it could make no more acquisitions until it put its house in order.
In 2005, stung by regulatory rebukes and unable to follow Mr. Weill’s penchant for expanding Citigroup’s holdings through rapid-fire takeovers, Mr. Prince and his board of directors decided to push even more aggressively into trading and other business that would allow Citigroup to continue expanding the bank internally.
One person who helped push Citigroup along this new path was Mr. Rubin.
The Times points to Rubin, a top Obama adviser whose acolytes will stock the new administration, as one of the two executives most responsible for what is essentially the demise of the firm.
In 2005, as Citigroup began its effort to expand from within, Mr. Rubin peppered his colleagues with questions as they formulated the plan. According to current and former colleagues, he believed that Citigroup was falling behind rivals like Morgan Stanley and Goldman, and he pushed to bulk up the bank’s high-growth fixed-income trading, including the C.D.O. business.
Former colleagues said Mr. Rubin also encouraged Mr. Prince to broaden the bank’s appetite for risk, provided that it also upgraded oversight — though the Federal Reserve later would conclude that the bank’s oversight remained inadequate.
So Rubin, the “finance genius” of his time, pushed Citi into CDOs late in the game. This not only had implications for Citi’s future, but for the inflation of the housing and credit bubble that was already well-inflated at that time. And Citi put those assets off its balance sheet so it could keep creating more.
The worst part of it is that Citi wouldn’t have even existed if it weren’t for Rubin:
When he was Treasury secretary during the Clinton administration, Mr. Rubin helped loosen Depression-era banking regulations that made the creation of Citigroup possible by allowing banks to expand far beyond their traditional role as lenders and permitting them to profit from a variety of financial activities. During the same period he helped beat back tighter oversight of exotic financial products, a development he had previously said he was helpless to prevent.
Nice that a year or so later he was making millions and millions of dollars from the company he helped create (and one that has a nasty history)
Greenspan’s reputation is already forever destroyed by this crisis. Looks like Rubin’s time has come as well.Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at email@example.com. Follow him on Twitter at @ryanchittum.