the audit

200 Years of Citi

An alternate history
March 9, 2012

Bloomberg’s Christine Harper, on Twitter, notes that Citigroup’s corporate timeline, launched in a must-have new iPad app called Citi News, has an odd sense of news judgment:

Citi `timeline’ of its 200-year history has “launches mobile phone banking service” as the key 2008 event

I guess they forgot about that $45 billion taxpayer bailout to stave off the catastrophic bankruptcy of a $2 trillion colossus.

Citi’s accompanying video on its 200 year history is quite the piece of corporate propaganda, too, as Eric Umansky says.

So I thought I’d dust off a few highlights from over the years that didn’t make it into Citi’s official history (which I should say, includes helping fund The Audit a few years ago). Heck, you can’t blame ’em. The press neglected some of these too.

Email me if I’ve left something out and I’ll update this list.

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— 1905: Scandal erupts over Standard Oil-dominated National City Bank’s sweetheart deal with Secretary of the Treasury. Congressman: “This is the old, bewhiskered, longstanding steal of the National City Bank.”

— October 1929: National City Bank chairman “Sunshine Charlie” Mitchell: “I know of nothing fundamentally wrong with the stock market or with the underlying business and credit structure.”

— 1933: Glass-Steagall Act is passed in large part due to National City Bank and Mitchell, who offloaded toxic securities onto unsuspecting investors. Senator Carter Glass said “Mitchell more than any 50 men is responsible for this stock crash.” Mitchell later forks over more than a million dollars to the government for tax evasion. Citi in 2012: “Charlie Mitchell is remembered by some as a controversial figure for his involvement in the securities market. However, his role in the creation of the consumer banking business cannot be overlooked. ‘In terms of what Mitchell did for the bank… it was really a tremendous contribution.'”

— 1961: To evade limits on interest rates, First National City CEO Walter Wriston begins selling CDs that can be cashed in early, which Paul Krugman and Robin Wells say “marked the first major crack in the system of bank regulation created in the 1930s, and hence arguably the first step on the road to the crisis of 2008.”

— 1970s: Wriston leads the banking industry’s charge into lending Latin American governments more than they could repay

— 1982: Wriston writes in The New York Times that a “country does not go bankrupt.”

— 1982: Citi and other banks get a backdoor bailout via aid to defaulting Latin American countries

–1986: Sandy Weill (and Jamie Dimon, Robin to Weill’s Batman) buys predatory lender Commercial Credit Corporation, beginning an empire that will later become Citigroup

–1988: Weill buys Primerica, a sketchy multilevel-marketing (pyramid style) firm that sells term life insurance

— 1991: Salomon Brothers, which Weill bought in 1998, pays a $290 million settlement in a Treasury bond scandal *

— 1998: In what was then the biggest merger in history, Citicorp combines with Weill’s Traveler’s Group to create Citigroup, despite it violating the Glass-Steagall Act

–1998-2001: Citi and its analyst Jack Grubman help inflate the tech bubble

— 1998-99: Treasury Secretary Robert Rubin pushes for the repeal of Glass-Steagall

— October 1999: Rubin leaves the Clinton Administration for a Citigroup job that will pay him $15 million a year to have no responsibilities

— November 1999: Congress repeals Glass-Steagall

— November 1999: CEO Sandy Weill urges telecom analyst Jack Grubman to take a “fresh look” at the stock of AT&T, whose CEO is on Citi’s board and controls a vote Weill needs in a power struggle with his co-CEO. Grubman sends the CEO a memo about wanting to get his twins into the prestigious 92nd Street Y. Citigroup donates $1 million to the Y, Grubman’s twins get two coveted spots, and Grubman upgrades AT&T to a “buy.”

— 2000 Citigroup buys predatory lender Associates First Capital for $31 billion

— 2000: Studies find that three-quarters of Citi’s mortgages are now made by a subprime unit

— 2001: Enron goes bankrupt after journalists help expose its fraudulent accounting. Citigroup will later pay investors and bondholders $3.7 billion for its role in the fraud. The SEC slaps Citi on the wrist and makes it promise not to break the law again

— July 2002: WorldCom goes bankrupt. Citigroup will later pay the second-largest securities settlement in history: $2.7 billion to WorldCom investors and bondholders for its role in one of the biggest frauds in history

— September 2002: Citigroup pays a record $215 million fine to settle a Federal Trade Commission complaint on predatory lending at Associates

— 2003: Grubman is barred from the industry for life for fraudulent research

–April 2004: Citigroup pays a record $400 million—twice as much as any other firm—to settle Eliot Spitzer’s charges over flawed, conflicted stock research that inflated the tech bubble and for giving CEOs it did business with preferential access to hot IPOs

— May 2004: Alan Greenspan’s (!) Federal Reserve gets a $70 million settlement out of Citigroup for predatory subprime lending

— September 2004: Japan kicks Citigroup private bank out of the country for overcharging customers and helping others make improper deals

— May 2005: Citi agrees to pay $208 million after the SEC says it defrauded mutual fund customers. The SEC makes Citi promise not to break the law it made Citi promise not to break again back in 2001

— May 2006: Citi agrees to pay $1.5 million after the SEC says it and other banks manipulated bond markets. The SEC makes Citi promise not to break the law it made Citi promise not to break again back in 2001 and 2005

— 2000-2007: Citigroup helps inflate the housing bubble with some $140 billion in collateralized debt obligations. It hands out $26 billion in subprime loans to consumers in 2005-2007

— July 2007: CEO Charles Prince tells the Financial Times that “As long as the music is playing, you’ve got to get up and dance.” Citigroup underwrites $50 billion worth of CDOs that year—more than any other bank

— November 2007: Prince is forced out after Citi announces it will write down up to $11 billion in toxic mortgage assets. Citi will ultimately take more than $30 billion in losses

— August 2008: Citi agrees to pay $18 million in a California settlement after it “knowingly stole from its customers, mostly poor people and the recently deceased,” in the words of California Attorney General Jerry Brown, by sweeping overpayments from their accounts into Citi’s fund and firing a whistleblower who complained

— October 2008: Citigroup gets bailed out for the first time (in this crisis, anyway), with $25 billion in TARP funds

–November 2008: Taxpayer rescue Citi from certain bankruptcy a second time with another $20 billion in taxpayer money and asset guarantees of some $300 billion

— December 2008: Citi agrees to repurchase $7 billion in auction-rate securities it sold with the SEC for telling investors they were safe when it knew they were deteriorating. The SEC makes Citi promise not to break the law it made Citi promise not to break again back in 2001, 2005, and 2006

— February 2009: The U.S. government announces its third Citi bailout in four months, and is now the largest shareholder in Citigroup, controlling more than a third of its shares

— April 2009: Citigroup shares fall to 97 cents a share, down 98 percent from the all-time high

— August 2009: Citi argues that its star energy trader should be exempted from bailout compensation restrictions and given a $100 million bonus

— 2010: Citi agrees to pay $75 million to settle SEC charges over misleading its investors at the start of the financial crisis about its subprime exposure, which it understated by $43 billion

— 2011: Citigroup pays $285 million for misleading investors on a toxic CDO deal one of its traders called “dogshit” and “possibly the best SHORT ever”

— 2012: Citigroup agrees to pay $2.2 billion to pay its portion of a settlement with the banking industry for the massive foreclosure scandal

— July 2012: Sandy Weill takes it all back, calling for investment banking to be separated from deposit taking—effectively reinstating Glass-Steagall he helped dismantle. His bad!


As Citi’s narrator says in the video, “Our reputation rests on the integrity and dedication of those that came before us.”

* List of updates: I originally said Weill bought Salomon Smith Barney in 1993. Smith Barney combined with Salomon in 1998. I added Mitchell’s tax evasion settlement in the 1933 item (h/t Mark Gimein). I added Sandy Weill’s astonishing support for breaking up the too big to fail banks.

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 Follow him on Twitter at @ryanchittum.